THE 
CLEARING  HOUSE 

Facts  covering  the  origin,  developments y 
functions y  and  operations  of  the  Clearing 
HousCy  and  explaining  the  systems, 
plansy  and  methods  promulgated  by  the 
Clearing  House  Section  of  the  American 
Bankers  Association 


BY 

JEROME  THRALLS 

SECRETARY  OF  THE  CLEARING  HOUSE  AND  NATIONAL  BANK 
SECTIONS  OP  THE  AMERICAN  BANKERS  ASSOCIATION 


PUBLISHED  BY 

THE  CLEARING  HOUSE  SECTION 

AMERICAN  BANKERS  ASSOCIATION 
NEW  YORK 


*^^<5 


^-IZ^ 


Copyright,  1916,  by 
JEROME  THRALLS 


INTRODUCTION 

THIS  book  is  based  on  practical  experience 
and  is  designed  chiefly  for  the  purpose  of 
conveying  to  the  reader  full  and  definite  in- 
formation regarding  the  origin,  development, 
functions  and  operations  of  the  Clearing  House. 

Only  a  limited  number  of  persons,  including 
bankers,  realize  the  important  part  that  Clear- 
ing Houses  have  played  in  the  development  of 
the  United  States. 

They  have  protected  the  finances  of  the  gov- 
ernment at  times  when  the  credit  of  the  nation 
was  imperilled.  They  are  the  machinery  that 
saved  thousands  of  business  concerns  from  ruin 
during  panics  and  financial  depressions.  Their 
influences  for  good  have  permeated  every  line  of 
industry  from  coast  to  coast.  They  are  the 
chief  factors  that  brought  about  the  reforms  in 
the  banking  and  currency  laws  and  the  improve- 
ments in  banking  methods  and  practices,  which  in 
turn,  have  made  the  financial  system  of  America 
equal  to  that  of  any  nation. 

JEROME  THRALLS 
iii 


357345 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/clearinghousefacOOthrarich 


CONTENTS 
The  Clearing  House 

Origin 

Classes  of  Clearing  Houses  . 
Early  Functions  and  Developments 
Objects  and  Purposes  . 

The  City  Department    • 

Clearing  House  Numbers   . 

Preparing  Items  for  Clearing 

Endorsements,  etc. 

Statements  and  Records 

Form  of  Statement  and  Settlement  Check 

Exchange  or  Clearing  Room 

Making  the  Exchanges 

Records  at  the  Clearing  House 

Clearings 

Apportioning  Balances 

Gold  Depositary  . 

Settlement  of  Balances 

Trading  of  Balances  . 

Fines    .... 

Loan  Certificates  . 

General  Business 

Expenses  and  Assessments 

The  Country  Department 

Objects  and  Purposes  . 
Origin  .... 


PAGK 

I 
I 

2 

3 
3 

5 

5 

5 
5 
6 

7&8 
9 

10 
10 

II 

IC 

12 
12 

13 
13 
13 
14 
14 

15 

IS 
IS 


vi  CONTENTS 

PAGE 

Operation i6 

Making  Arrangements  and   Rates       .  .      i6 

Endorsing  and  Preparing  of  Items     .  .      17 

Due  Bills 18 

Handling  of  Items  at  the  Clearing  House      .      18 

Records ,19 

Protested  and  Unpaid  Items       .         .  .19 

Distribution  of  Returns       ...  .19 

Pro-rating  Expenses  and  Exchange     .  ,      20 

Savings  Effected .21 

Savings  to  Country  Banks  ...  .21 

The  Examination  Department  •      •     23 

Limited  Authority    (of  National  and  State 

Bank  Examiners)  ....  .23 

Supervision .24 

Examinations .24 

Reports 25 

Moral  Effect  of  Examinations     .         .  .26 

Check  on  Loans  .....  ^      ^ 

Proposed  Federal  Examinations  .         .  .28 

Expenses  and  Assessments  ...  .29 

Influence  of  the  Clearing  House     30 

New  Clearing  Houses  Necessary  .         .  -30 

Co-operation  and  Extension         .         .  .31 

Competition  not  Restrained  ...         .31 

Articles  of  Association       ...    32 

Objects  and  Purposes 32 

Officers ZZ 

Vacancies .33 

Executive  Committee 33 


CONTENTS 


Vll 


Disbursements .34 

Powers  of  Officers 34 

Representation      .         .         .         .         .  .34 

Authority  of  Manager 34 

Clearing  Hour 34 

Settlements 34 

Numbers .35 

Default 35 

Errors  and  Returned  Items  ...  .  3<5 
Hour  for  Returning  Items  ...         .36 

New  Members .36 

Suspensions 37 

Withdrawals 37 

Amendments Z7 

By-Laws,  Rules  and  Regulations         .         .      37 

Additional  Suggestions  for  Those 
Desiring  to  Organize  a  Clearing 
House -38 

Maximum  Interest  Rates  ....  38 
Interest  on  Savings  Accounts     ,         .         .38 

Exchange  Charges 39 

Collection  Charges 39 

Public  Deposits 39 

Escrow  Charges 39 

Safe  Deposit  Rentals 39 

Donations 39 

Borrower's  Statements  .         .         .         .39 

Credit  Information 39 

Past-due  Paper  and  Overdrafts  ...  39 
Hours  and  Holidays  .  .  .  .  #39 
Rotation  of  Managers  ....      40 

Meetings 40 

Dues 40 


vm  CONTENTS 

PAGE 

Fines 40 

Rotation  of  Officers 40 

Data 40-41 


Universal  Numerical  System    •       •    42 

Various   Plans 42 

Explanation  of  the  System  .         .         .  .43 

How  Numbers  Are  Assigned       .         .  .43 

Savings  Effected .45 

Endorsement  Stamps   ....  .46 

Transit  Numbers  on  all  Checks  .        .  .46 

Numbers  on  all  Drafts          ...  ,46 

Key  to  Numerical  System  ...  .46 

No-Protest  Symbol  Plan     .      .       .48 

Explanation  of  the  Plan      ...  .48 

Symbol  Used ,48 

Instructions   for  Cash  Letters     .         .  .49 

Instructions  Automatically  Conveyed  .  .      49 

Pian  Universal  in  Scope      ...  .50 

Plan  Copyrighted          ....  .51 

Uniformity  Essential 51 

Total  Bank  Transactions  •      •       -53 

Advertising  Feature 53 

Duplication  in  Clearings      ...         .53 

What  Total  Bank  Transactions  Represent     ,  54 

Method  of  Assembling  the  Figures    .       .  55 

Form  Used 56 

Comparison  of  Clearings  and  Bank  Trans- 
actions    57 


CONTENTS  « 

PAGE 

Federal  Reserve  Clearing  System  •    59 

Gold  Settlement  Fund  ...         .59 

Accounts  Carried 60 

Clearing  by  Wire 60 

Balances  and   Settlements       ....      60 
Diversity   of   Methods   Experimented  With      61 

Uniform  Plan 62 

Provisions  of  the  Plan  .         .         .         ,      62 

Items  Received  at  Par  ...         .62 

Tentative  Credit 63 

Non-member  Bank  Checks  ...         .63 
Expense  of  Shipping  Funds  .         .         .63 

Liability .64 

Service   Charge .64 

Penalty  for  Impaired  Reserves  .         .         .64 
Burden  of  Expense      .....      65 

Clearing  House  Section      •      •       -6; 

Origin  and  Purposes 67 

Membership .68 

Expenses .68 

Work   Done 68 

Executive  Committee  and  Officers       .         .      68 
Representation  on  Council  of  A.  B.   A.     .      69 

Officers     and     Committees  •    7o 

Presidents 7o 

Vice-Presidents 7° 

Chairmen      .......  7^ 

Secretaries 7^ 

Members  of  Executive  Committee       .         .  7^ 

Committee  on  Rates,  Rules  and  Regulations  73 
Committee  Succeeding  to  Work  of  Confer- 
ence of  Clearing  Houses      .        .         .74 


X  CONTENTS 

PAOB 

Numerical  System  Committees      .        .  .  74-75 

Committee  on  Codifying  Collection  Laws  .      74 

Committee  on  Country  Gearing  Houses  .      75 

No-protest  Symbol  Committee      .         .  .75 

Clearing  Houses  of  the  U.  S.  .      •    76 

Members  of  the  Clearing  House  Section 

Clearing  Houses  Conducting  Country  De- 
partments        7^-77-7^79 

Clearing    Houses    Conducting   Examination 

Departments  ....    76-77-7^-79 

Non- members 79-80 


THE  CLEARING  HOUSE 

THE  idea  of  the  Clearing  House,  like  many 
important  inventions  and  scientific  dis- 
coveries, had  its  origin  in  an  accidental  way. 
In  the  early  70's  of  the  seventeenth  century, 
the  banks  of  the  City  of  London,  England, 
employed  walk  clerks,  or  collectors,  as  they  Origin 
would  be  termed  in  this  country,  whose  duties 
were  to  go  from  bank  to  bank  and  collect  the 
actual  cash  to  cover  checks,  drafts  and  credits 
of  a  like  nature  that  accumulated  in  the  day's 
business.  Two  of  these  boys,  representing  banks 
located  in  extreme  opposite  sections  of  the  City 
of  London,  met  in  a  downtown  coffee  house,  and 
while  visiting  and  lunching  together  discovered 
that  each  held  a  like  amount  of  checks  and  drafts 
against  the  other's  bank.  The  thought  of  trading 
these  checks  and  drafts,  thereby  saving  them- 
selves a  trip  half-way  across  the  city,  suggested 
itself  to  these  young  men.  They  not  only  traded, 
but  agreed  to  meet  in  the  same  place  on  the 
following  day  for  the  purpose  of  again  trading. 
The  news  of  what  these  two  boys  were  doing 
spread  to  the  other  collectors,  and  within  a  very 


THE  'CtfiARING  HOUSE 


Classes  of 

Clearing 

Houses 


^^ 


short  while  practically  all  of  the  collectors  of  the 
banks  of  the  City  of  London  were  meeting  in  this 
coffee  house,  and  making  trades  daily  and  pay- 
ing cash  to  cover  the  differences.  Some  of  the 
officers  of  the  banks  of  London,  on  hearing  what 
these  boys  were  doing,  criticized  them  severely. 
Others  saw  merit  in  the  idea,  and  it  resulted  in 
a  conference  at  which  it  was  agreed  to  hire  a 
room  in  the  down-town  section,  where  the  boys 
might  meet  each  day  and  trade  checks  and  drafts. 
Errors  resulting  from  these  trades  made  it  neces- 
sary to  install  a  system  of  records,  and  to  place 
a  man  in  charge;  and  from  that  developed  the 
London  Clearing  House,  which  is  one  of  the 
largest,  if  not  the  largest,  Clearing  House  in  the 
world.  The  idea  came  to  America  in  the  year 
1853,  at  which  time  the  New  York  City  Clearing 
House  was  established.  It  was  later  taken  up  by 
Boston,  Pittsburg,  Philadelphia,  Chicago,  and 
drifted  on  westward  to  the  Coast ;  and  now  every 
city  of  any  size  or  commercial  importance  has  a 
Clearing  House  of  some  description. 

Clearing  Houses  are  of  two  classes — incor- 
porated and  voluntary  organizations.  Some 
authorities  hold  that  all  Qearing  Houses  should 
be  incorporated,  but  under  existing  laws  and  con- 
ditions it  seems  there  is  little  or  nothing  to  be 
gained  through  incorporation,  and  the  voluntary 
organization  is  accordingly  the  form  of  associa- 
2 


THE  CLEARING  HOUSE 

tion  that  prevails  throughout  the  United  States. 

One  of  the  principal  purposes  of  every  Clear-   Early 

ing  House  embodies  the  thought  that  permeated  Functions 

the  minds  of  the  two  English  lads  who  met  in       , 

^      ,  ,        .        r  11.,-  1  velopments 

the  coftee  house — that  is,  of  estabhshmg  a  place 

where  representatives  of  the  members  may  meet 

each  day  and  trade  or  exchange  items.     In  the 

early  days  banks  operating  through  the  Clearing 

Houses  advanced  large  sums  of  money  to  the 

government,  rendering  a  great  patriotic  service  by 

protecting  the  credit  of  the  nation  at  a  time  when 

it  was  imperiled. 

The  rapid  development  in  all  lines  of  industry, 
and  the  great  growth  of  financial  affairs  through- 
out the  country,  have  made  further  co-operation 
necessary,  and  as  a  result  many  additional  func- 
tions have  been  taken  on  by  Clearing  Houses. 

The  objects  and  purposes  of  a  modern  Clearing  Objects 
House  Association  might  be  stated  as  follows :  ^^^  ^^^' 

(i)     To  facilitate  the  handling  of  business  be-  P°^*^ 
tween  its  members. 

(2)  To    facilitate   the   handling  of   business  ^''*" 
between  these  institutions  and  banks  and  trust 
companies  of  other  localities. 

(3)  To  foster  and  encourage  conservative, 
safe  and  sound  banking  methods  and  banking 
practices. 

(4)  To  use  its  influence  in  matters  of  com- 
mon interest  to  its  members,  and  for  the  general 


THE  CLEARING  HOUSE 

good  of  the  community  wherein  it  is  located. 

(5)  To  perform  such  other  services  as  are 
agreed  upon  by  its  members  and  which  are  not 
in  contravention  of  Federal  or  state  laws. 

The  performance  of  such  functions  is  gen- 
erally undertaken  through  three  separate  depart- 
ments, namely,  (i)  the  City  Department,  (2)  the 
Country  Department  and  (3)  the  Examination 
Department. 


THE  CITY  DEPARTMENT 

THE  original  functions  of  the  Clearing  House, 
namely,  the  exchange  of  items  and  settle- 
ment   of     resulting    balances,     are     conducted 
through  what  is   commonly  termed  "The   City 
Department."    On  organizing  a  Clearing  House,  Clearing 
each  member  is  given  a  number,  under  which  House 
its  business  is  transacted.     These  numbers  are  Numbers 
generally   assigned   on   the   seniority   basis — the 
oldest  bank  member  being  assigned  No.  i,  the 
second  oldest  No.  2  and  so  on.     When  a  new 
member  is  taken  in  it  is  given  the  next  highest 
number  not  in  use. 

Each  member  maintains  in  its  office  a  depart- 
ment known  as  its  Clearing  House  Department, 
and  to  which  are  charged  by  the  several  depart- 
ments all  items  drawn  on  or  payable  at  the  offices  Preparing 
of  the  other  members.    These  items  are  usually  ^t^n^s  for 
recorded  in  the  department  where  they  originate      ®*""S 
and  on  reaching  the  Clearing  House  Department 
are  inspected  as  to  signature,  dates,  etc.,  and  are 
endorsed  with  a  rubber  stamp,  showing  the  name  Endorse- 
and  Clearing  House  number  of  the  clearing  bank  «ient8,etc. 
and  the  date  of  clearing.    They  are  next  sorted — 
S 


THE  CLEARING  HOUSE 

all  items  drawn  on  or  payable  at  the  office  of 
each  member  being  placed  in  a  separate  pile. 
When  the  sorting  is  completed  and  the  clearing 
hour  approaches,  each  pile  of  checks  is  taken  to 
an  adding  machine  and  a  list  thereof  is  made 
and  a  total  is  taken.  The  items  are  then  done 
up  into  packages,  the  list  covering  each  package 
being  placed  on  its  face,  and  the  Clearing  House 
numbers  of  the  members  on  which  the  items  are 
to  be  cleared  are  marked  on  the  respective  pack- 
ages with  pen  or  pencil.  The  lists  on  the  pack- 
ages are  endorsed  with  the  regular  Clearing 
House  endorsement  stamp.  The  packages  are 
then  sealed  or  bound  up  with  rubber  bands. 
Statements  Each  member  is  supplied  by  the  Clearing 
and  Rec-  House  with  statement  blanks  which  are  in  dupli- 
^^^^  cate  form  and  which  show  at  the  top  the  name 

and  number  of  the  member  using  the  same. 
The  blanks  used  in  different  places  are  not  uni- 
form, but  essential  features  are  indicated  in  the 
accompanying  illustration. 

Along  the  left  margin  of  each  statement  ap- 
pear, in  regular  order,  the  names  and  numbers 
of  all  the  members.  Immediately  to  the  right  of 
these  names  and  numbers  are  several  columns, 
the  two  principal  ones  of  which  are  headed  **On 
Clearing  House"  and  "From  Clearing  House." 
The  total  shown  on  each  package  of  items  is 
entered  in  the  column  "On  Clearing  House"  and 
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First  National  Bank 
Union  State  Bank 
Merchants  National  Bank 
Farmers  Trust  Co. 
City  National  Bank 
People's  State  Bank 
Town  &  County  Bank 
Goldburg  Bank 
Country  Clearing  House 
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THE  CITY  DEPARTMENT 

directly  opposite  the  name  and  number  of  the 
bank  on  which  the  items  are  to  be  cleared.  When 
all  totals  have  been  entered,  the  statement  is 
footed,  and  if  the  work  has  been  correctly  done 
the  footings  thus  obtained  will  prove  against  the 
combined  total  of  all  charges  made  by  the  several 
departments  to  the  Clearing  House  Department. 
Assuming  they  do  so  prove,  the  packages  are 
placed  in  a  satchel  or  chest  and  the  Clearing 
House  clerk  and  messenger  take  the  satchel  or 
chest  and  statement  and  make  a  mad  rush  to  the 
Clearing  House.  The  reason  for  this  rush  is 
that  the  clearing  hour  is  fixed,  and  any  member 
not  represented  on  the  dot  is  fined ;  and  if  tardy 
over  a  certain  number  of  minutes,  the  member 
is  shut  out  of  the  clearing  for  the  day. 

The  exchange  room  at  the  Clearing  House  is  Exchange 
equipped  with  a  cage  or  desk  for  each  member,  rqqj^*""^ 
and  a  manager's  desk.  The  cages  are  usually 
arranged  in  parallel  rows  and  in  numerical  order 
with  reference  to  the  numbers  of  the  members. 
On  arrival  at  the  Clearing  House  the  clerks  enter 
their  respective  cages  and  the  messengers  pass 
around  and  deposit  their  packages  of  items — 
packages  No.  i  being  deposited  in  cage  No.  i, 
packages  No.  2  in  cage  No.  2,  and  so  on  down 
the  line.  When  all  clerks  and  messengers  have 
arrived  at  the  Gearing  House  and  all  deposits 
have  been  made,  each  clerk  has  on  his  desk  a 
9 


THE  CLEARING  HOUSE 


Making 
the  Ex- 
changes 


Records 
at  the 
Clearing 
House 


package  of  items  from  each  member,  and  he 
enters  on  his  statement  in  the  column  headed 
"From  Clearing  House"  and  opposite  the  re- 
spective names  and  numbers  of  the  members  the 
amount  shown  on  the  package  received  from 
each.  The  packages  when  thus  entered  are 
dropped  into  a  receptacle  from  which  they  are 
taken  by  the  messengers,  who  rush  back  to  the 
banks  so  that  the  items  may  be  quickly  distributed 
to  the  bookkeepers,  who  pass  upon  the  genuine- 
ness of  signatures,  etc.,  all  items  being  cleared 
subject  to  being  returned  at  a  certain  hour  if 
found  not  good  for  any  reason.  Each  clerk  foots 
his  statement  when  all  totals  have  been  entered, 
and  if  he  finds  he  brought  a  greater  volume 
to  the  Clearing  House  than  he  received  from 
the  members  he  carries  his  "From  Clearing 
House"  footings  to  his  "On  Clearing  House" 
column  and  makes  his  deduction,  showing  the 
amount  due  his  bank  from  the  Clearing  House, 
or  his  credit  balance,  as  it  is  termed.  Should  the 
amount  received  at  the  Clearing  House  exceed 
the  amount  brought  to  the  Clearing  House,  the 
operation  would  be  the  reverse,  and  he  would 
show  the  amount  due  the  Clearing  House,  or  his 
debit  balance.  A  duplicate  of  each  statement  is 
passed  to  the  manager,  who  enters  on  the  Clear- 
ing House  records  the  net  debit  and  credit  bal- 
ances and  the  "On  Clearing  House"  and  "From 

10 


THE  CITY  DEPARTMENT 

Clearing  House"  totals.  He  then  foots  the  bal- 
ances and  if  they  prove  the  clerks  are  dismissed 
and  return  to  their  respective  banks.  The  state- 
ments are  filed  as  a  record  of  the  transactions 
between  the  several  members,  and  the  manager 
foots  the  "On'*  and  "From"  Clearing  House 
columns;  and  if  they  agree  it  is  conclusive  evi- 
dence that  the  work  has  been  correctly  done. 
The  "On  Clearing  House"  column  represents  the  Clearings 
items  brought  to  the  Clearing  House  and  are 
the  figures  that  are  reported  in  the  newspapers 
and  financial  journals  as  the  bank  clearings. 
Where  an  average  of  ten  millons  of  dollars'  worth 
of  items  are  cleared  daily  the  resulting  balances 
run  about  six  hundred  thousand  dollars;  so  by 
the  operation  the  amount  of  cash  necessary  to 
handle  ten  millions  of  dollars'  worth  of  business 
is  reduced  from  ten  millons  of  dollars  to  six 
hundred  thousand  dollars. 

The  next  step  is  the  settlement  of  balances.  Apportion- 
One  plan  is   for  the  manager  to  draw  checks  ing  Bal- 
against   the   debtor   members   in    favor   of   the  *"<^®* 
creditor  members;  the  first  check  being  drawn 
against  the  largest  debtor,  in  favor  of  the  small- 
est creditor,  the  second  in  favor  of  the  second 
small  creditor,  and  so  on  down  the  line  until  all 
the  creditors  have  been  satisfied.     These  man- 
ager's checks  are  payable  in  cash  and  generally 
must  be  settled  at  or  before  2  o'clock  P.  M.  of 
II 


THE  CLEARING  HOUSE 


Gold  De- 
positary 


Settlement 
of  Bal- 
ances 


the  day  on  which  drawn.    In  case  of  failure  to 
collect  any  such  check  at  or  before  the  specified 
hour,  all  members  other  than  the  one  against 
whom  the  check  is  drawn  are  released  from  re- 
sponsibility thereon.    To  simplify  the  payment  of 
these  checks  a  Clearing  House  gold  depositary  is 
usually  maintained,  in  which  members   deposit 
gold  of  required  weight  and  United  States  gold 
certificates,  in  lieu  of  which  are  issued  Clearing 
House  gold  certificates  in  amounts  of  five  and  ten 
thousand  dollars.    These  certificates  pass  current 
among  the  members,  the  holders  thereof  being 
the  owners  of  the  gold  and  United  States  gold 
certificates  so  deposited  and  which  count  as  legal 
reserve.     In   settling  balances   of   six   hundred 
thousand  dollars  it  is  necessary  to  use  only  sixty 
ten  thousand  dollar  gold  certificates.     This  plan 
saves  abrasion  on  the  gold  as  well  as  the  labor 
of  carrying  it  back  and  forth  and  recounting  it. 
It  also  eliminates  the  danger  of  street  robberies. 
The  manner  of  settling  Clearing  House  bal- 
ances, and  the  forms  used,  vary  slightly.    In  some 
cities  the  debtor  banks  pay  the  cash  to  the  man- 
ager of  the  Clearing  House,  and  he  in  turn  pays 
it  to  the  creditor  banks ;  while  in  other  cities  the 
creditor  banks  present  the  Clearing  House  man- 
ager's settlement  checks  to  the  debtor  banks  direct 
for  payment.     In  some  cities,  in  order  to  avoid 
congestion  of  work  and  to  head  oflf  check  kiting, 

12 


THE  CITY  DEPARTMENT 

informal  exchanges  are  made  by  the  members. 
Receipts  are  taken  to  cover  items  so  exchanged 
and  are  passed  through  the  Clearing  House  at 
the  next  regular  exchange.  Trading  of  balances  Trading  of 
is  also  in  vogue  in  some  cities,  and  since  the  in-  Balances 
augu ration  of  the  Federal  reserve  system  many 
balances  are  settled  by  checks  on  Federal  reserve 
banks.  To  encourage  promptness,  care  and  ac- 
curacy on  the  part  of  clerks,  fines  are  imposed  for 
errors  in  lists,  wrong  clearings,  missing  endorse- 
ments, errors  in  statements,  misconduct,  etc. 
These  fines  range  from  ten  cents  to  five  dollars.  Fines 
and  are  assessed  against  banks  whose  representa- 
tives are  the  offenders.  The  proceeds  usually 
go  toward  defraying  the  general  expenses  of  the 
Association.  To  get  an  idea  of  the  convenience 
and  saving  that  result  from  the  daily  exchanges 
at  the  Clearing  House  one  need  only  to  consider 
the  number  of  clerks  that  would  be  required  to 
go  from  bank  to  bank  and  collect  and  handle 
the  actual  cash  represented  by  ten  millions  of 
dollars'  worth  of  items,  then  compare  that  process 
with  the  clearing  of  a  like  amount  of  items  and 
the  settlement  of  balances  resulting  therefrom. 

One  of  the  important  functions  of  the  City  Loan  Cer- 
Department  has  been  the  issuance  of  loan  certifi-  tificates 
cates  and  scrip  during  times  of  stringency,  but 
with  the  passage  of  the  Federal  Reserve  Act  it 
is  hoped  that  this  function  is  forever  eliminated. 
13 


THE  CLEARING  HOUSE 


General 
Business 


Expenses 
and  As- 
sessments 


It  was  by  co-operation  through  this  department 
that  the  banks  of  New  York,  Philadelphia  and 
Boston  were  able  to  protect  the  credit  of  the 
nation  during  the  early  years  of  its  existence. 
The  City  Department  handles  the  general  busi- 
ness of  the  Association.  It  is  of  a  legislative 
and  administrative  character.  Through  it  rules 
and  regulations  regarding  exchange  and  collec- 
tion charges  and  interest  rates  allowed  on  bal- 
ances are  formulated  and  enforced.  It  provides 
for  uniform  counter  checks,  uniform  advertising, 
and  looks  after  matters  of  common  interest  to  the 
member  banks,  and  the  general  good  of  the  com- 
munity. Small  banks  that  do  not  feel  justified 
in  joining  the  Clearing  House  arrange  with  some 
member  to  act  as  their  agent  and  to  clear  for 
them. 

The  expenses  of  this  department  are  usually 
defrayed  from  a  general  fund  arising  from  fines 
and  from  special  assessments  against  the  mem- 
bers based  upon  the  clearings  for  the  quarter 
preceding  such  special  assessments. 


H 


and  Pur- 
poses 


THE  COUNTRY  DEPARTMENT 

THE  personal  check  has  been  a  great  factor 
in  the  development  of  all  lines  of  industry 
throughout  the  United  States,  and  with  the  un-  Objects 
precedented  growth  of  this  nation  there  came  an 
attending  increase  in  the  volume  and  number  of 
such  checks.  The  burden  of  labor  and  ex- 
pense involved  in  handling  these  items  con- 
stantly increased,  and  in  some  of  the  large  col- 
lection centers  this  burden  grew  to  such  enormous 
proportions  that  it  consumed  the  earnings  of  the 
banks  and  jeopardized  their  existence.  Boston, 
Mass.,  was  the  first  center  to  feel  keenly  the  ef- 
fects of  the  expense  of  handling  out-of-town 
personal  checks,  and  the  weight  of  exchange  that 
was  being  charged  thereon.  The  Boston  banks 
realized  the  important  part  that  these  checks  were 
playing  in  the  business  world,  and  the  necessity 
for  their  continued  use,  yet  they  were  obliged  to 
seek  some  means  of  reducing  the  burden  of  ex- 
pense incurred  in  their  handling.  They  accord-  Origin 
ingly  created  a  "Country  Collection  Department" 
or  "Country  Clearing  House,"  as  it  is  generally 
termed.  Kansas  City,  Mo.,  Nashville,  Tenn., 
15 


THE  CLEARING  HOUSE 


Operation 


Making 
Arrange- 
ments and 
Rates 


Atlanta,  Ga.,  and  Oklahoma  City,  Okla.,  rapidly 
followed  the  lead  of  Boston.  St.  Louis,  Mo., 
New  York  City,  Richmond,  Va.,  Detroit,  Mich., 
and  several  other  cities  have  organized  similar 
departments.  The  Country  Clearing  House 
might  best  be  understood  by  considering  it  as  a 
co-operative  bank  owned  by  the  Clearing  House 
Association  and  with  its  functions  limited  to  the 
collection  of  out-of-town  cash  items  on  a  certain 
territory,  and  the  performance  of  services  inci- 
dental thereto,  and  with  its  depositors  limited  to 
the  members  of  the  Clearing  House  Association. 
The  manager  in  charge  is  given  full  power  to 
make  arrangements  with  the  banks  in  the  ter- 
ritory covered,  and  proceeds  very  much  along  the 
same  lines  as  does  the  officer  of  a  bank  in  mak- 
ing connections  for  his  institution.  Strength, 
service  and  rates  are  the  principal  factors  in  de- 
termining as  to  what  bank,  or  banks,  the  Country 
Clearing  House  will  send  its  items  on  towns 
wherein  there  are  two  or  more  banks.  A  circular 
letter  explaining  the  plan  is  sent  to  each  bank 
in  the  district  by  the  manager.  This  letter  is 
followed  by  a  card  requesting  certain  informa- 
tion, including  a  list  of  the  bank's  correspondents, 
a  list  of  the  bank's  officers,  the  time  of  arrival 
and  departure  of  mails,  the  rate  of  exchange,  if 
any  charge  is  to  be  made  on  cash  items,  and  a 
statement  of  the  financial  condition  of  the  in- 
i6 


THE  COUNTRY  DEPARTMENT 

stitution.  These  cards  are  filed  for  future  refer- 
ence, and  in  case  of  doubt  as  to  the  validity  of 
the  information  given  thereon,  it  is  checked  up 
and  further  investigation  of  the  character  of  the 
officers  and  the  general  character  of  the  institu- 
tion is  made  through  its  correspondents  and  other 
sources.  When  the  arrangements  have  been  per- 
fected, each  member  of  the  Clearing  House  is 
furnished  with  a  book  giving  a  complete  list  of 
all  banks  to  which  the  Clearing  House  has  ar- 
ranged to  send  items  and  the  rate  of  exchange 
that  will  be  charged  by  each.  Members  are  in- 
formed, from  time  to  time,  of  all  changes  in  and 
additions  to  this  list. 

Each  member  of  the  Clearing  House  is  pro-  Endorsing 
vided  with  a  combination  endorsing  stamp  which  and  Pre- 
endorses  the  items  to  the  Clearing  House  and  P^^^S 
for  the  Clearing  House  at  one  application,  and 
each  member  is  also  supplied  with  combination 
record-sheets-and-foreign-slips,     which     are    of 
such   form  that  when  the  items  are  being  re-  ^ 

corded  thereon,  they  are  through  the  means  of 
carbon  sheets  entered  on  the  foreign  slips  to 
which  they  are  finally  attached  when  brought  to 
the  Country  Clearing  House  for  deposit.  Each 
foreign  slip  shows  at  the  top,  the  Clearing  House 
number  of  the  member  endorsing  the  items,  the 
date  of  the  endorsement  and  the  name  of  the 
bank  and  town  to  which  the  items  are  to  be  sent, 
17 


THE  CLEARING  HOUSE 


Due-Bills 


Handling 
of  Items 
at  the 
Clearing 
House 


in  accordance  with  the  Country  Clearing  House 
list.  This  information  is  repeated  on  a  perforated 
stub  at  the  bottom  of  the  slip.  The  amount  of 
each  item  is  entered  on  the  body  of  the  slip  and 
a  total  is  made  and  carried  to  the  stub.  The 
foreign  slips  thus  prepared  with  items  attached 
are  sorted  in  alphabetical  order  and  an  adding 
machine  list  is  made  of  the  totals.  The  list  is 
endorsed  by  the  member,  and  the  items  are  placed 
in  a  package  with  the  list  on  its  face,  and  are 
delivered  to  the  Country  Clearing  House  in  this 
shape.  A  check  or  due-bill,  payable  through  the 
Clearing  House  at  a  subsequent  date,  is  issued 
to  the  member  in  lieu  of  the  total  day's  deposit. 
The  date  these  checks  are  clearable  is  fixed  by  the 
average  time  required  to  get  returns  for  items  on 
the  district  covered  by  the  Country  Clearing 
House. 

When  the  packages  are  opened  at  the  Clearing 
House,  the  stubs  are  detached  and  filed.  An  add- 
ing machine  list  is  made  of  the  totals  shown  on 
the  slips  and  is  proved  against  the  list  which  ac- 
companied the  items.  The  slips  with  items  at- 
tached are  then  distributed  on  the  sorting  tables 
in  alphabetical  order  with  reference  to  towns. 
When  all  the  slips  with  items  attached  have  been 
distributed,  they  are  sorted  further  with  reference 
to  banks  to  which  they  are  to  be  sent,  so  that 
when  all  deposits  have  been  made  and  the  sort- 
i8 


THE  COUNTRY  DEPARTMENT 

ing  is  completed  the  items  are  ready  to  be  run 
on  the  Country  Clearing  House  letters  of  trans- 
mittal. (These  letters  and  corresponding  en- 
velopes are  prepared  in  advance.)  The  totals 
shown  on  the  slips  and  the  numbers  of  the  mem- 
bers are  entered  on  the  letters  of  transmittal  by 
means  of  the  adding  machine  and  a  sub-total  is 
made  on  each  letter  and  is  carried  to  a  stub  at  the 
bottom  of  the  letter.  These  stubs  are  perforated 
and  bear  the  date  and  addresses  as  shown  on  the 
corresponding  letters.  They  are  detached  and  Records 
filed  as  the  record  of  the  transit  charges  against 
the  out-of-town  banks.  At  the  close  of  each  day, 
a  total  is  taken  of  all  such  stubs,  and  if  the  work 
has  been  correctly  done,  this  total  will  prove 
against  the  total  of  all  deposits  made  with  the  de- 
partment for  the  day,  and  is  the  charge  to  be 
made  against  the  transit  account.  When  letters 
are  paid,  the  accounts  are  credited  by  eliminating 
or  removing  from  transit  the  corresponding  stubs. 
All  returns  are  made  direct  to  the  manager  of  the  Protested 
Clearing  House,  and  all  refused  and  protested  ^^^  ^n- 
items,  together  with  the  fees  charged  thereon,  P^^^-ttems 
are  deducted  and  returned  with  draft  to  cover  the 
balance  of  the  letter  with  which  they  were 
originally  transmitted. 

The  Country  Clearing  House  is  represented  as  Distribu- 
a  member  in  the  daily  exchanges  at  the  Clearing  *^^**  °^ 
House,  and  in  that  way  distributes  the  returns      ®*"^"* 
19 


THE  CLEARING  HOUSE 

and  secures  credit  for  all  returned  items,  and  the 
members  charge  to  the  Country  Clearing  House 
the  checks  or  due  bills  which  have  been  issued  in 
lieu  of  items  deposited  with  the  department  for 
collection.  In  some  Country  Clearing  Houses  the 
estimated  time  required  for  getting  returns  is  so 
close  to  the  actual  time  that  the  due  bills,  as  they 
become  payable,  just  about  offset  the  returns,  and 
the  small  debit  and  credit  balances  that  arise  be- 
cause of  their  not  being  an  exact  offset,  are  car- 
ried over  by  the  bank  that  falls  heir  to  the  same 
until  the  following  day ;  while  in  other  places  the 
amount  due  to  each  member  is  figured  each  day 
and  new  bills  are  issued  for  the  exact  amount 
Prorating  due.  The  office  or  operating  expenses  of  the 
department  are  pro-rated  monthly  on  the  basis  of 
the  total  business  and  the  total  number  of  items 
handled  through  the  department  for  the  month. 
The  exchange  charges  are  assessed  against  the 
members  at  the  close  of  each  month,  each  member 
being  charged  with  the  actual  cost  of  its  items. 
These  charges  are  taken  from  the  letters  as  they 
are  paid  and  are  figured  and  totaled  up  each  day. 
The  plan  is,  therefore,  fair  and  equitable  to  all 
Clearing  House  members.  The  Country  Clearing 
House  does  not  interfere  with  the  individual  ar- 
rangements of  its  members  with  their  correspon- 
dents, but  merely  gives  them  the  benefits  of  addi- 
tional facilities.    It  is  a  machine  operated  strictly 

20 


Expenses 
and  Ex 
change 


.^^^ 


THE  COUNTRY  DEPARTMENT 

for  economy  and  better  service.    It  materially  re- 
duces exchange  charges,  encourages  more  prompt         ^ 
returns,  and  lessens  every  item  of  expense  inci- 
dental to  handling  of  out-of-town  checks. 

Ten  members  have  items  on  p^  certain  town,  the  Savings 
minimum  postage  is  2c.  each  or  2:0c.  for  all,  while,  ■^"®*^*®^ 
were  the  items  consolidated  and  sent  from  the 
Country  Clearing  House  in  one  inclosure,  the 
total  postage  would  be  from  2c.  to  4c.  and  a  sav- 
ing from  1 6c.  to  i8c.  would  be  effected.  The 
saving  on  two  thousand  towns  would  be  from 
$32  to  $36  per  day  on  postage  alone.  In  addi- 
tion there  is  a  saving  of  nine  remittance  letters, 
nine  envelopes,  and  a  corresponding  saving  of 
labor  in  handHng  the  returns.  The  same  is  true 
with  reference  to  tracing  and  correspondence,  and 
from  the  standpoint  of  the  country  banker,  it  re- 
lieves him  of  considerable  work,  since  he  is  re- 
quired to  write  one  draft  instead  of  ten,  address 
one  envelope  instead  of  ten,  and  use  2c.  in 
postage  instead  of  20c.  One  of  the  Country  Savings 
Clearing  Houses  in  handling  items  on  5,600  banks  ^  ountry 
has  effected  a  saving  of  more  than  50  per  cent, 
in  the  gross  expense  involved,  and  has  reduced 
the  time  required  for  getting  returns  more  than 
25  per  cent.  The  Boston  Country  Clearing  House 
has  succeeded  in  making  arrangements  whereby  it 
receives  par  returns  from  90  per  cent,  of  the 
banks  in  the  entire  New  England  States,  and 

21 


THE  CLEARING  HOUSE 

has  reduced  the  cost  of  handling  to  the  low  mini- 
mum of  yc.  per  thousand  dollars  or  about  one- 
third  of  a  cent  per  item.  Other  Country  Clearing 
Houses  in  operation  have  made  corresponding 
progress. 


THE  EXAMINATION  DEPARTMENT 

ONE  of  the  comparatively  recent  and  most 
valuable  functions  of  the  Clearing  House 
is  that  of  conducting  through  its  managing 
committee  rigid  examinations  of  the  members 
and  clearing  banks  (the  banks  receiving  the 
privileges  through  the  agency  of  some  mem- 
ber). Federal  and  state  bank  examiners  render  Limited 
most  valuable  service,  but  under  the  customs  and  Authority 

I  of   N^3.~ 

laws  they  have  little  power  that  is  of  a  remedial  ^^^^^i  ^^^ 
character.    It  is  their  duty  to  see  that  every  bank  state  Bank 
which  they  examine  is  conducted  according  to   Examin- 
law ;  that  its  capital  is  unimpaired ;  that  the  books,  ers) 
records  and  accounts  are  properly  kept  and  that 
the  reports  made  to  the  Comptroller  or  Banking 
Department  are  correct.    They  must  confine  their 
criticisms  practically  to  infractions  of  the  law, 
and  offences  must  reach  the  stage  of  capital  im- 
pairment or  insolvency  before  official  action  can 
be  taken.    At  this  stage  the  remedy  is  an  assess- 
ment against  the  shareholders,  in  some  form  or 
other,   or   forced   liquidation.     Bank  examiners 
cannot  prevent  bank  failures,  but  their  visits  and 
the  police  power  with  which  they  are  clothed,  are 
23 


THE  CLEARING  HOUSE 

valuable  influences  in  keeping  banks  in  good  con- 
dition. Some  factor  is  needed,  however,  which 
will  restrain,  repair  and  correct  minor  irregu- 
larities, and  unsound  conditions,  before  they  de- 
velop into  the  most  dangerous  stages.  The  Ex- 
amination Department  of  the  Clearing  House  is 

Supervision  such  a  factor.  This  department  is  under  the 
supervision  of  a  managing  committee,  usually 
known  as  the  Clearing  House  Committee.  This 
committee  is  generally  elected  annually  from 
among  the  active  officers  of  the  member  banks, 
and  is  authorized  by  rule  to  employ  competent 
examiners  and  assistants,  who  in  turn  are  em- 
powered, under  the  direction  of  the  Clearing 
House  Committee,  to  make  examination  at  will  of 
all  banks  having  the  privileges  of  the  Clearing 
House.  Careful  consideration  is  given  to  the 
selection  of  the  examiner  and  assistants.  The 
success  of  the  plan  depends  to  a  large  measure 
upon  the  competency,  faithfulness  and  fidelity  of 
these  men.  They  are  generally  required  to  sign 
an  agreement  not  to  engage  in  the  business  of 
banking  or  enter  the  employ  of  any  institution 
under  their  jurisdiction  within  a  period  of  three 
or  five  years  after  leaving  the  employ  of  the 
Clearing  House. 

Examina-  Clearing  House  examinations  include,  in  ad- 

dition to  verification  of  the  assets  and  liabilities 
of  the  bank,  a  thorough  examination  into  the 
24 


tions 


THE  EXAMINATION  DEPARTMENT 

workings  of  every  department.  They  are  not 
intended  to  be  a  careful  audit  of  all  the  accounts. 
That  is  left  to  the  bank's  own  auditor  and  to 
special  auditors  who  are  called  in  from  time  to 
time.  Following  each  examination  a  duplicate  Reports 
detailed  report  is  made,  giving  a  description  of 
the  loans,  bonds,  investments,  and  other  assets. 
This  report  shows,  under  a  special  schedule,  loans 
both  direct  and  indirect,  to  officers,  directors  and 
other  employees,  as  well  as  to  firms  and  corpora- 
tions in  which  they  may  be  interested.  It  further 
covers  the  conditions  that  are  found  in  every  de- 
partment of  the  bank.  One  copy  of  this  detailed 
report  is  filed  at  the  Clearing  House,  and  is  open 
to  the  examiner  and  manager  only,  except  in 
special  instances  where  it  is  necessary  that  it  be 
brought  before  the  Clearing  House  Committee. 
The  other  copy  is  filed  with  the  President  of  the 
bank  examined,  and  the  directors  are  notified  and 
requested  to  call  at  the  office  of  the  President  and 
inspect  the  report.  The  examiner  requires  an 
acknowledgement  of  this  notice  from  each  di- 
rector, with  a  promise  on  the  part  of  the  director 
to  call  and  go  over  the  report.  This  encourages 
closer  attention  to  the  bank's  affairs,  and  makes 
certain  that  every  director  has  opportunity  of 
knowing  the  bank's  true  condition.  A  skeleton 
of  this  report,  setting  forth  in  a  general  way  the 
character  of  the  bank's  assets,  and  giving  a  list 
25 


THE  CLEARING  HOUSE 


Moral  Ef- 
fect of  Ex- 
aminations 


of  the  loans  to  employees,  officers  and  directors, 
and  to  firms  and  corporations  in  which  they  may 
be  interested — also  giving  a  special  schedule  of 
all  of  the  excessive  and  important  loans,  and 
making  mention  of  the  irregularities,  bad  condi- 
tions and  dangerous  tendencies  and  practices  that 
exist  in  the  institution — is  brought  before  the 
Clearing  House  Committee  by  the  examiner.  The 
Clearing  House  Committee  goes  over  the  report 
carefully  and  considers  fully  the  examiner's 
views  and  recommendations.  Then  the  com- 
mittee calls  in  the  managing  officer  of  the  bank 
examined,  and  gives  him  the  benefit  of  its  views, 
and  makes  such  suggestions  as  may  seem  expedi- 
ent. The  advice  of  the  committee  is  generally 
heeded,  and  whatever  the  trouble  may  be,  it  is 
caused  to  be  corrected. 

No  law  nor  plan  of  bank  examination  can  be 
devised  which  will  prevent  bank  failures.  This  is 
because  human  judgment  is  not  perfect,  and  the 
making  of  loans  and  investments  depends  upon 
human  judgment;  but  greater  care  will  be  exer- 
cised by  every  banker  in  making  his  loans  and 
investments  if  he  knows  they  are  to  be  subjected 
to  rigid  inspection  and  criticism  by  a  competent 
committee  of  well-trained  and  well-informed 
bankers.  The  managing  officers  of  every  bank 
that  is  subject  to  Clearing  House  examinations 
will  use  their  best  efforts  to  the  end  that  their 


THE  EXAMINATION  DEPARTMENT 

institution  shall  be  kept  in  such  shape  as  will  in- 
voke compliments  rather  than  criticisms  from  the 
committee.  Pride  and  conscience  are  the  two 
most  potent  factors  in  keeping  bankers  and  busi- 
ness men  within  the  bounds  of  law  and  reason. 
These,  coupled  with  fear  of  detection  and  ex- 
posure, far  outweigh  the  penalties  that  are  fixed 
by  law.  The  installation  of  the  first  Clearing 
House  examination  department  was  precipitated 
by  a  failure  involving  many  millions  of  dollars, 
and  most  bankers  who  are  acquainted  with  the 
facts  believe  that  failure  would  have  been  averted 
had  the  bank  been  subject  to  Clearing  House  ex- 
aminations. Through  the  guidance  and  advice  of 
the  Clearing  House  Committee  many  bad  situa- 
tions, which  would  have  developed  into  failures, 
have  been  worked  out  in  cities  where  Clearing 
House  examination  departments  are  maintained. 
In  some  instances  bank  Presidents  have  been  re- 
quested to  resign  and  dispose  of  their  holdings  in 
order  that  their  respective  banks  might  be  freed 
from  their  influence,  incompetency  and  bad  judg- 
ment. 

The  Clearing  House  examiner  usually  keeps  a  Check  on 
card  index  of  all  loans  of  importance,  and  can  Loans 
tell  closely  as  to  what  is  the  total  of  the  obliga- 
tions of  any  individual,  firm  or  corporation  to  the 
banks  under  his  jurisdiction.  This  is  valuable 
information,  and  is  not  obtained  by  state  or  Fed- 
27 


THE  CLEARING  HOUSE 


Proposed 
Federal 
Examina- 
tions 


eral  examiners.  Where  the  aggregate  of  the  bor- 
rowings of  any  firm,  individual  or  corporation  is 
in  excess  of  what  in  the  judgment  of  the  ex- 
aminer and  Clearing  House  Committee,  such  firm, 
individual  or  corporation  is  entitled  to  receive,  the 
banks  interested  are  so  advised,  and  are  thus 
given  opportunity  to  call  upon  the  borrower  to 
reduce  the  obligations  to  a  safe  basis.  Many  con- 
cerns are  headed  off  in  this  way,  which  if  per- 
mitted to  expand  further,  would  be  the  victims  of 
certain  ruin,  and  would  inflict  heavy  losses  upon 
the  banks  involved.  Clearing  House  examina- 
tions are  a  tremendous  factor  in  encouraging 
careful,  conservative  and  sound  banking.  Many 
improvements  in  the  systems  and  methods  of  the 
various  departments  of  banks  are  brought  about 
through  their  influence.  They  hinder  the  de- 
velopment of  illegitimate  schemes,  and  make  the 
financing  of  legitimate  business  easier  and  more 
certain.  They  have  been  characterized  by  a 
Comptroller  of  the  Currency  as  being  infinitely 
superior  to  state  and  Federal  examinations. 
The  framers  of  the  Federal  Reserve  Act  rec- 
ognized the  value  of  Clearing  House  examin- 
ations, and  sought  to  include  in  the  Act  provisions 
for  the  introduction  of  a  similar  plan  in  the 
Federal  reserve  districts,  to  be  operated  under 
the  direction  of  the  Federal  reserve  banks,  but  it 
is  not  likely  that  the  system  of  Federal  bank 
28 


THE  EXAMINATION  DEPARTMENT 

examinations  will  be  changed  to  conform  to  this 
idea  until  the  offices  of  the  Comptroller  of  the 
Currency  and  the  Federal  Reserve  Board  are 
consolidated.  In  the  meantime,  the  clearing 
houses  in  cities  having  a  sufficient  number  of 
banks  to  justify  the  maintenance  of  examination 
departments  will  not  measure  up  to  the  standard 
of  responsibility  they  owe  to  their  respective  com- 
munities if  they  do  not  investigate  the  Clearing 
House  examination  plan  with  a  view  of  institut- 
ing such  departments.  The  expense  of  main- 
tenance is  comparatively  small  and  the  benefits 
are  many. 

The  expenses  of  this  department  should  be  de-  Expenses 
frayed  out  of  a  fund  arising  from  an  annual  fee 
charged  against  each  bank  subject  to  examination 
and    from   special   assessments   based   on   total 
assets. 


and  As- 
sessments 


INFLUENCE  OF  CLEARING  HOUSES 


New 
Clearing 
Houses 
Necessary 


THE  erroneous  idea  that  Clearing  House 
Associations  are  sort  of  monopolistic  af- 
fairs, destined  to  foster  and  further  the  in- 
terests of  big  banks  in  reserve  and  central  re- 
serve cities,  at  the  expense  and  detriment  of  the 
banks  in  the  smaller  cities  and  towns,  is  being 
rapidly  dissipated.  Good  bankers,  whether  oper- 
ating on  a  large,  medium  or  small  scale,  have 
begun  to  realize  that  the  permanency  and  success 
of  their  respective  institutions  are  dependent,  not 
only  upon  the  prosperity  of  the  farmers,  laborers, 
merchants,  manufacturers  and  general  business 
interests,  but  rest  to  a  large  degree  upon  the 
condition  and  solvency  of  their  competitors. 
There  has  been  a  greater  improvement  in  the 
banks  of  this  country  from  the  standpoint  of 
strength  and  efficiency  during  the  past  eight  or 
ten  years  than  during  any  like  period  of  the 
life  of  this  Nation.  This  improvement  is  not  due 
so  much  to  legislation  as  it  is  to  friendly  co- 
operation brought  about  through  organizations 
such  as  Clearing  House  Associations. 

There  was  a  time  when  good  bankers  would  lie 
back  and  chuckle  because  of  having  unloaded  un- 
30 


INFLUENCE  OF  CLEARING  HOUSES 

satisfactory  customers  upon  neighboring  banks, 
but  experience  has  taught  that  an  accumulation  of 
such  risks  brings  ruin,  and  not  only  the  bank 
directly  interested  is  affected,  but  for  years  there- 
after every  bank  in  the  community  sustains  a 
proportionate  loss  of  business.  The  growing  ten-  Co-opera- 
dency  is  to  combine  efforts  and  to  co-operate  on 
matters  of  common  interest,  and  to  the  end  that 
unsatisfactory  individuals,  firms  and  corporations, 
shall  either  reform  their  methods  or  be  denied 
accommodations  by  the  banks.  Clearing  House 
Associations  using  the  Examination  System  af- 
ford a  channel  for  exchange  of  information 
which  greatly  reduces  the  amount  of  unsatisfac- 
tory business.  Co-operation  through  Clearing 
Houses  does  not  eliminate  competition.    Compe-  Competi- 

tition  grows  keener  every  year,  but  its  form  is  be-  ^^  *^?*   , 
:•     1      I,  A      t!'  u       A  Restrained 

mg  entirely  changed.  It  is  now  based  on  person- 
ality, strength  and  service.  The  Clearing  House 
through  evolution  has  become  a  tower  of  strength 
and  a  great  instrument  for  service  to  its  members 
and  to  the  public.  Such  organizations  should  be 
formed  in  every  city  wherein  two  or  more  com- 
mercial banks  are  located. 


31 


ARTICLES  OF  ASSOCIATION 


Objects 
and  Pur- 
poses 


THE  following  draft  of  Articles  of  Asso- 
ciation is  suggested  for  use  in  organizing 
Clearing  House  Associations  in  small  cities 
and  towns.  The  details  may  be  changed 
to  meet  local  conditions.  It  will  be  found  de- 
sirable in  most  instances  for  new  associations  to 
operate  under  temporary  rules  until  experience 
has  demonstrated  as  to  what  by-laws,  rules  and 
regulations  may  be  required : 

'The  undersigned  banks  of hereby 

associate  ourselves  as  a  Clearing  House  Associa- 
tion for  the  purpose  of  effecting  at  one  place  the 
daily  exchange  of  checks  and  other  clearable 
items  between  the  several  members  and  of  set- 
tling the  balances  with  each  other  that  arise  from 
such  exchanges ;  also  for  the  purpose  of  providing 
such  safeguards,  rules,  regulations  and  con- 
veniences, as  may  be  desirable  and  which  are  not 
in  contravention  of  state  or  Federal  laws,  in  and 
governing  our  relations  with  each  other,  with 
banks  and  trust  companies  of  other  localities  and 
with  the  general  public,  and  agree  to  be  governed 
by  the  following  Articles  of  Association : 
32 


ARTICLES  OF  ASSOCIATION 


Officers 


"(i)  The  name  of  this  Association  shall  be 
the Clearing  House  Association. 

"(2)  The  officers  shall  be  a  president,  vice- 
president,  secretary  and  treasurer,  who  shall  be 
elected  from  among  the  active  officers  of  the 
banks  that  are  members  of  the  Association  by 
ballot  on  the  organization  of  the  Association  and 
annually  thereafter  on  the  second  Monday  in 
January  at  (fix  hour),  or  failing  at  a  meeting  at 
that  time,  such  officers  shall  be  elected  at  a  special 
meeting  thereafter  called  by  the  president  for 
that  purpose,  and  shall  hold  office  until  their  suc- 
cessors are  elected,  and  shall  perform  such  duties 
as  usually  pertain  to  their  respective  offices. 

"(3)     Vacancy  in  any  office  of  the  Association  Vacancies 
may  be  filled  temporarily  by  the  Executive  Com- 
mittee by  the  appointment  of  an  active  officer 
from  the  member  bank  with  which  the  retiring  of- 
ficer was  connected. 

"(4)  The  officers  shall  constitute  an  execu- 
tive committee  to  arrange  for  the  place  and 
manner  of  the  exchanges  and  details  of  the  same, 
and  to  enforce  the  by-laws,  rules  and  regulations 
of  the  Association.  They  shall  assess  the  cost  of 
the  maintenance  of  the  Association  upon  the 
members  in  proportion  to  capital  and  surplus  (or 
according  to  total  resources  or  total  clearings). 
The  treasurer  shall  make  a  report  of  receipts  and 
expenditures  at  the  end  of  each  fiscal  year. 
33 


Executive 
Committee 


THE  CLEARING  HOUSE 


Disburse- 
ments 

Powers  of 
Officers 


Represen- 
tation 


Authority 
of  Man- 
ager 


Clearing 
Hour 


Settle- 
ments 


"(5)  The  treasurer  shall  be  the  custodian  of 
the  funds  of  the  Association  and  shall  disburse 
same  by  check  countersigned  by  the  President. 

"(6)  The  president  shall  call  meetings  of  the 
Association  whenever  in  his  opinion  its  interests 
may  require  or  whenever  requested  so  to  do  by 
the  executive  committee,  or  upon  request  of  any 
two  members,  and  at  all  meetings  each  member 
shall  be  entitled  to  one  vote.  A  majority  of  the 
members  shall  constitute  a  quorum. 

"(7)  Members  may  be  represented  at  any 
meeting  of  the  Association  by  one  or  more  of- 
ficers but  shall  be  entitled  to  only  one  vote. 

"(8)  The  secretary  (acting  as  manager)  shall 
have  immediate  charge  of  the  business  of  the 
Clearing  House  and  his  decisions  concerning 
questions  of  practice  and  details  at  the  Clearing 
House  shall  rule  until  modified  by  the  executive 
committee. 

"(9)     The  hour  for  making  exchanges  shall 

be   o'clock  a.  m.  of  each  business  day, 

when  the  Clearing  House  clerks  from  the  sev- 
eral member  banks  shall  report  with  their  re- 
spective demands,  separately  made  out  against 
each  member  in  detail  and  the  totals  summed 
up.  The  work  of  clearing  shall  not  be  delayed 
longer  than  five  minutes  after a.  m.  on  ac- 
count of  the  failure  of  any  bank  to  be  represented 

at   that  time.     At    . .    o'clock  the   settling 

34 


ARTICLES  OF  ASSOCIATION 

clerks  shall  return  for  settlement,  when  the  man- 
ager shall  issue  his  checks  or  warrants  upon  the 
debtor  banks  in  favor  of  creditor  banks  for  the 
balances,  which  checks  shall  immediately  be  pre- 
sented, and  on  presentation  be  settled  by  the 
debtors  to  the  satisfaction  of  the  creditors  in 
whose  hands  only  they  are  available. 

"(lo)  A  number  shall  be  permanently  as- 
signed to  each  member.  These  numbers  shall  be 
assigned  on  the  seniority  basis;  the  oldest  bank 
a  member  being  given  number  one  and  the  sec- 
ond oldest  number  two,  etc. 

"(ii)  In  case  of  failure  on  the  part  of  any  Default 
member  of  the  Association  to  pay  promptly  the 
checks  of  the  manager  to  cover  balances  arising 
from  the  exchanges,  such  checks  shall  be  im- 
mediately returned  to  the  manager,  who  shall 
call  upon  the  other  members  to  make  up  the 
sum  for  which  payment  has  been  refused  in  pro- 
portion to  the  amount  of  items  upon  the  default- 
ing member  sent  into  the  Clearing  House  at  the 
preceding  exchange,  which  sums  so  furnished 
shall  constitute  a  claim  in  the  hands  of  the  re- 
sponding members  and  all  checks  received  from 
the  Clearing  House  by  the  defaulting  member 
shall  be  delivered,  if  required,  to  the  members 
owning  the  same  without  mutilation.  The  agency 
of  the  Clearing  House  in  the  matter,  it  is  under- 
stood, is  only  as  trustee  and  in  no  case  is  the 
35 


THE  CLEARING  HOUSE 


Errors  and 

Returned 

Items 


Hour  for 

Returning 

Items 


New 
Members 


Association  to  be  held  responsible  for  any  loss 
that  may  occur. 

"(12)  Errors  in  the  exchanges  and  claims 
arising  from  return  of  checks  or  from  any  other 
cause  are  to  be  adjusted  directly  between  the 
members  who  are  parties  to  the  same  and  not 
through  the  Clearing  House. 

"(13)  Checks  received  through  the  exchanges 
and  returned  as  'not  good'  or   'mis-sent'   shall 

be  returned  by  . . p.  m.  direct  to  the  bank 

from  which  received  and  said  bank  shall  im- 
mediately refund  to  the  bank  returning  the  same 
the  amount  for  which  they  were  originally 
cleared.  If  not  returned  by p.  m.  the  re- 
sponsibility of  the  bank  which  sent  said  checks 
through  the  exchanges  shall  cease. 

"(14)  These  articles  of  association  shall  be- 
come binding  upon  the  respective  members  from 
the  time  they  are  signed  by  each  respectively,  pro- 
vided that  at  the  time  of  such  signature  there 
shall  be  deposited  with  the  secretary  a  properly 
certified  copy  of  a  resolution  of  the  board  of 
directors  of  such  incorporated  member,  or  a  cer- 
tificate of  assent  of  such  unincorporated  member 
authorizing  the  signing  of  said  articles.  New 
members  may  be  admitted  to  the  Association  at 
any  meeting  by  a  two-thirds  vote  of  all  the  mem- 
bers and  these  articles  shall  become  binding  on 


ARTICLES  OF  ASSOCIATION 


such  new  members  when  signed  and  assented  to 
as  above  provided. 

"(15)  Any  member  may  be  suspended  or  ex- 
pelled from  the  Association  for  cause  upon  a 
two-thirds  vote  of  all  the  members. 

"(16)  Any  member  may  withdraw  from  the 
Association  after  giving  thirty  days'  notice  to 
that  effect,  provided  no  assessments  or  fines  are 
due  and  unpaid. 

"(17)  Amendments  to  these  articles  of  asso- 
ciation may  be  made  at  any  meeting  by  a  vote  of  a 
majority  of  all  the  members.  Notice  of  proposed 
amendments  shall  be  given  in  writing  to  each 
member  at  least  ten  days  previous  to  the  day 
on  which  they  are  acted  upon. 

"(18)  By-laws,  rules  and  regulations  govern- 
ing the  business  of  the  Association  in  the  making 
of  exchanges,  providing  for  the  imposition  of 
fines  and  other  details  (and  also  fixing  exchange 
and  collection  charges  and  providing  for  examina- 
tion of  members)  may  be  adopted  at  any  meeting 
of  the  Association  by  vote  of  a  majority  of  all  the 
members  and  may  be  amended  by  like  vote. 
Notice  of  the  proposed  adoption  of  by-laws  or  of 
proposed  amendments  thereto  shall  be  given  in 
writing  to  each  member,  at  least  ten  days  previous 
to  the  day  on  which  they  are  acted  upon." 


Suspen- 
sions 

With- 
drawals 


Amend- 
ments 


By-laws, 
Rules  and 
Regula- 
tions 


37 


ADDITIONAL     SUGGESTIONS     FOR 

THOSE   DESIRING   TO   ORGANIZE 

A  CLEARING  HOUSE 


Maximum 

Interest 

Rates 


Interest 
on  Sav- 
ings Ac- 
counts 


THE  banks  in  every  city,  county,  town  and 
village  in  the  United  States  will  find  friend- 
ly co-operation  advantageous  and  profitable,  not 
only  to  themselves  but  to  the  communities  they 
serve. 

The  following  ideas  are  offered  for  considera- 
tion as  a  basis  for  co-operation  and  may  be  in- 
cluded to  advantage  in  the  by-laws,  rules  and 
regulations  of  any  Clearing  House  Association 
located  in  a  state  where  co-operation  in  this  man- 
ner is  not  prohibited  by  law : 

a.  Fixing  a  maximum  of  3  per  cent,  on  in- 
terest to  be  allowed  on  certificates  of  deposit  and 
fixing  the  time  of  such  certificates  3,  4,  6  and  12 
months.  No  interest  to  be  allowed  after  maturity 
or  if  cashed  before  maturity. 

b.  Fixing  the  maximum  of  3  per  cent,  to  be 
allowed  on  savings  accounts.  Same  to  be  com- 
puted and  paid  in  July  and  January,  allowing  in- 
terest from  the  first  of  each  month  where  the 
deposits  are  made  within  the  first  five  days  of  the 
month. 

38 


ADDITIONAL  SUGGESTIONS 

c.  Fixing  the  fees  to  be  charged  for  drafts  Exchange 
sold  over  the  counter.  Charges 

d.  Fixing  a  uniform  charge   for  presenting  Collection 
and  collecting  drafts  and  notes.  Charges 

e.  Arranging  to  pro-rate  all  deposits  of  public  Public 
funds.    This  for  the  safety  of  the  banks  and  the  Deposits 
public. 

f .  Fixing  a  minimum  per  transaction  and  per  Escrow 
thousand  dollars  for  handling  matters  in  escrow. 

g.  Fixing  a  minimum  rental  on  safe  deposit  ^    . 

1  posit 

h.     Arranging  for  all  requests  for  donations  of  _ 

o  X     1.  r         J  -1  Donations 

$15  or  more  to  be  referred  to  a  special  com- 
mittee. 

i.     Requiring  annual  statements  from  all  cus-  Borrowers* 

tomers  having  a  line  of  $1,000  or  more  and  en-  Statements 
couraging  the  procuring  of  statements  from  all 
borrowers. 

j.     Exchanging  credit  information  on  all  cus-  Credit  In- 

tomers  who  patronize  two  or  more  banks  or  who  ^0""***°** 

seek  to  change  their  connections.  Past  Due 

k.     Submitting  to  a  special  committee  monthly  P^P®^  ^^^ 

a  list  of  all  past  due  paper  and  over  drafts.  Drafts 

1.     Fixing  the  business  hours  and  rigidly  ob-  Hours  and 

serving  legal  holidays.  Holidays 

CLEARING  HOUSES  IN  THE  SMALLER  PLACES 
MAY  FIND  THE  FOLLOWING  SUGGESTIONS  ADVAN- 
TAGEOUS : 

1st.     To  designate  a  clerk  in  the  employ  of  a 
39 


THE  CLEARING  HOUSE 


Rotation 
of  Man- 
agers 


Meetings 

Dues 

Fines 

Rotation 
of  Of- 
ficers 


member  to  serve  as  manager  for  a  period  of  two 
months  and  during  the  period  of  his  service  hold 
all  meetings  and  make  the  daily  exchanges  in  the 
directors'  room  of  that  member.  Designate  the 
clerk  in  the  employ  of  another  member  for  the 
following  two  months  and  so  on  until  all  the 
members  have  been  recognized. 

2nd.  To  hold  regular  meetings  of  the  Associ- 
ation on  the  second  Tuesday  of  every  second 
month  at  7.30  P.  M. 

3rd.  To  arrange  for  a  membership  fee  of  say 
$10  and  annual  dues  of  a  like  amount. 

4th.  To  fix  a  schedule  of  fines  for  errors,  in- 
fractions of  the  rules,  etc. 

5th.  To  arrange  for  rotation  in  all  offices  of 
the  Association. 


DATA 


The  first  clearing  house  in  the  United  States 
was  organized  in  1853. 

The  Clearing  House  Section  work  started  in 

1905. 

There   are   233    regularly   organized   clearing 
houses  in  the  United  States. 

191  Clearing  House  Associations  are  members 
of  the  Clearing  House  Section. 

42  Clearing  House  Associations  are  not  mem- 
bers of  the  Clearing  House  Section. 
40 


ADDITIONAL  SUGGESTIONS 

13  clearing  houses  maintain  Country  Collec- 
tion Departments. 

20  clearing  houses  have  examination  depart- 
ments. 


THE  UNIVERSAL  NUMERICAL  SYSTEM 

URGENT  need  for  short  methods  of  han- 
dling the  ever  increasing  flow  of  checks 
and  drafts,  generally  known  as  transit  items, 
led  ingenious  bank  transit  men  to  devise  va- 
rious schemes  under  which  numbers  and  let- 
ters were  assigned  to  banks  and  bank  customers 
to  be  used  in  lieu  of  their  respective  names,  in 
making  record  of  transit  items  on  collection  let- 
ters, remittance  letters,  books,  statements,  etc. 
The  first  system  of  letters  and  numbers  to  be 
used  in  this  way  was  inaugurated  by  the  Ameri- 
can Bankers  Association  in  the  year  1908. 
Various  These  schemes  were  designed  principally  for 

local  use,  were  successful  in  a  measure,  but  con- 
fusion arising  because  of  conflictions  in  numbers 
and  letters  assigned  by  neighboring  banks,  dem- 
onstrated the  necessity  for  consolidation  of  the 
several  plans  under  central  control. 

On  December  12  and  13,  1910,  a  meeting  of 
transit  managers  from  a  number  of  the  leading 
cities  was  held  under  the  auspices  of  the  Clear- 
ing House  Section  of  the  American  Bankers 
Association  for  the  purpose  of  devising  a  num- 
bering system  that  would  be  universal  in  its  scope, 
42 


Plans 


UNIVERSAL  NUMERICAL  SYSTEM 

would  overcome  this  confusion  and  be  adaptable 
for  the  use  of  any  bank,  regardless  of  its  size. 

The  plan  evolved  at  this  meeting  was  approved    Explana- 
and  adopted  by  the  Executive  Council  of  the   ^°^  ° 
American  Bankers  Association  on  May  2,  191 1,  ^^^ 
and  has  since  been  known  as  the  Universal  Nu- 
merical System. 

It  provides  for  the  assignment  of  a  number 
to  every  bank,  banker  and  trust  company  in  the 
United  States  that  is  authorized  to  do  a  general 
banking  business;  for  the  assignment  of  num- 
bers designating  cities  and  states,  also  for  the 
assignment  of  numbers  to  the  treasurer  and  as- 
sistant treasurer  of  the  United  States,  to  certain 
postoffices,  as  well  as  to  express  companies,  rail- 
roads and  firms  upon  whom  checks  are  drawn. 
The  assignment  of  numbers  to  local  bank  cus- 
tomers, individuals,  firms  and  corporations  aside 
from  those  mentioned,  was  left  entirely  in  the 
hands  of  the  individual  banks. 

Numbers  used  to  designate  cities  and  states   How  Num- 
are  termed  prefix  numbers.  ^^"^^  *^® 

Forty-nine  of  the  leading  collection  centers,  ^^^® 
including  the  reserve  and  central  reserve  cities 
and  the  cities  of  Buffalo,  New  York,  and  Mem- 
phis, Tennessee,  were  given  the  numbers  ranging 
from  one  to  forty-nine,  same  being  assigned  in 
the  order  of  the  population  of  these  cities  as 
shown  by  the  government  census  of  1910. 
43 


THE  CLEARING  HOUSE 

In  this  arrangement  Brooklyn  is  included  with 
New  York  City,  Kansas  City,  Kansas,  is  included 
with  Kansas  City,  Missouri,  and  South  Omaha 
with  Omaha. 

The  states  were  divided  into  five  sections, 
Eastern,  Southeastern,  Central,  Southwestern 
and  Western.  The  state  containing  the  princi- 
pal collection  centers  in  each  section  was  placed 
at  the  head  of  its  section  and  the  other  states 
in  each  section  were  arranged  in  alphabetical  or- 
der. Prefix  numbers  from  50  to  58  inclusive 
were  assigned  to  the  states  in  the  Eastern  Sec- 
tion ;  60  to  69  to  the  states  in  the  Southeastern  ; 
70  to  79  to  those  in  the  Central ;  80  to  88  to  those 
in  the  Southwestern,  and  90  to  99  inclusive  to 
those  in  the  Western  Section.  Prefix  numbers 
59  and  89  were  reserved  to  be  assigned  later  to 
Alaska  and  the  island  possessions  of  the  United 
States.  The  Clearing  Houses  in  the  forty-nine 
cities  that  were  given  the  prefix  numbers  from 
I  to  49  inclusive  had  previously  designated  their 
respective  members  by  numbers. 

Numbers  corresponding  to  these  so-called 
clearing  house  numbers  were  assigned  to  the 
clearing  house  member  banks  in  these  cities  and 
the  other  banks  in  each  of  these  cities  were  ar- 
ranged in  the  order  of  their  seniority  and  were 
so  numbered. 

This  same  scheme  was  followed  in  assigning 
44 


UNIVERSAL  NUMERICAL  SYSTEM 

the  numbers  to  banks  in  the  largest  city  in  each 
state,  outside  the  forty-nine  cities  above  re- 
ferred to. 

All  other  cities  and  towns  in  each  state  hav- 
ing two  or  more  banks  were  arranged  in  the 
order  of  their  population.  The  banks  in  each 
city  or  town  were  arranged  in  the  order  of  their 
seniority  and  beginning  with  the  lowest  number 
not  already  used,  the  numbers  were  assigned  to 
the  banks  in  the  order  so  arranged.  The  one- 
bank  towns  in  each  state  were  then  arranged  in 
alphabetical  order  and  the  banks  in  these  towns 
were  numbered  in  the  order  thus  arranged,  the 
bank  in  the  town  heading  the  list  being  given 
the  lowest  number  not  in  use,  etc.  Blank  num- 
bers were  reserved  in  each  city  of  5,000  popu- 
lation or  over,  to  be  assigned  to  new  banks  and 
numbers  are  available  for  assignment  to  new 
banks  in  other  locations. 

Through  the  use  of  this  system  in  registering  Savings 
transit  items  instead  of  writing  out  the  names.  Effected 
many  thousands  of  dollars  are  saved  annually  in 
time  and  labor.     This  saving  is  participated  in 
by  every  bank  either  directly  or  indirectly  and 
in  proportion  to  the  volume  of  its  business. 

The  observance  of  the  following  suggestions  by 
every  bank  will  materially  facilitate  and  expedite 
the  handling  of  transit  items  and  will  insure  the 
45 


THE  CLEARING  HOUSE 


Endorse- 
ment 
Stamps 


Transit 
Numbers 
on  all 
Checks 


Numbers 
on  all 
Drafts 


Key  to 

Numerical 

System 


realization  of  the  greatest  possible  benefits  from 
the  system. 

1st.  Endorsing  all  transit  items  with  an  en- 
dorsement stamp  bearing  in  figures  of  bold  and 
distinct  type  the  transit  number  assigned  to  it. 

2nd.  Having  printed  in  figures  of  plain  and 
distinct  type,  immediately  following  its  name  on 
all  checks  drawn  upon  it,  on  all  of  its  certifi- 
cates of  deposit  and  all  of  its  cashier's  checks, 
the  number  assigned  to  it.  If  the  title  fills  the 
space  across  the  item  (but  in  no  other  case),  the 
number  may  be  placed  in  the  extreme  upper  left- 
hand  corner. 

3rd.  Having  its  number  printed  in  the  same 
manner  as  in  suggestion  No.  2,  on  all  drafts  on  or 
"payable  if  desired"  at  its  correspondent,  also 
having  printed  on  such  drafts  and  immediately  to 
the  right  of  the  name  of  its  correspondent  the 
number  assigned  to  said  correspondent.  (In 
cases  where  there  is  not  sufficient  space  to  right 
of  the  name  of  the  correspondent  for  its  number, 
the  number  may  be  placed  immediately  in  front 
of  the  city  where  payable.) 

4th.  Drawing  drafts  to  be  sent  in  payment  of 
remittances  to  the  order  of  the  banks  instead 
of  to  the  order  of  bank  officers. 

The  plan  provides  for  the  publication  by  the 
official  numbering  agents  of  a  book,  known  as  the 


UNIVERSAL  NUMERICAL  SYSTEM 

"Key  to  Numerical  System  of  the  American 
Bankers  Association." 

This  book  contains  a  list  of  the  banks  in  each 
state,  together  with  the  numbers  assigned  to  each 
arranged  in  alphabetical  order,  also  contains  in 
a  separate  division  a  list  of  the  numbers  of 
banks  in  each  state  together  with  the  banks  to 
which  they  are  assigned,  arranged  in  numerical 
order.  It  is  a  convenient  reference  from  which 
can  instantly  be  learned  the  name  of  any  bank 
whose  number  is  given  or  from  which  the  num- 
ber of  any  bank  can  be  secured  if  the  name  is 
known. 

The  cost  of  this  "Key"  is  $1.50  and  it  may  be 
had  upon  application  to  the  Secretary  of  the 
Clearing  House  Section.  Supplements  thereto 
are  published  semi-annually,  giving  new  numbers 
assigned,  cancellations  and  changes.  These  sup- 
plements are  distributed  free  to  the  holders  of 
the  "Key." 


^ 


NO-PROTEST  SYMBOL  PLAN 

AN  IMPROVED  METHOD  OF  CONVEYING  NO-PROTEST 
INSTRUCTIONS 


Symbol 
Used 


ANY  bank  that  receives  from  its  customer, 
corporation,  firm,  individual  or  bank,  a 
check  or  draft  on  a  bank  which  it  desires  to 
have  handled  as  a  "no-protest"  item,  can  con- 
vey such  instructions  through  several  intermedi- 
ate banks  to  the  final  paying  bank  by  means  of 
an  inexpensive  rubber  stamp.  To  do  this  an 
impression  of  the  stamp  should  be  made  on  the 
face  and  as  near  the  right  hand  end  of  the  item 
as  is  possible.  The  stamp  should  be  3^  x  J^  of  an 
inch  in  size,  and  should  contain  the  letters  "N.  P." 
and  the  universal  numerical  transit  number  of 
the  bank  and  should  be  of  the  following  de- 
sign:* 


N.  P. 
83-164 


*  The  number  assigned  to  your  bank  under  the  Uni- 
versal Numerical  System  should  appear  on  the  stamp 
which  you  use. 

48 


NO-PROTEST  SYMBOL  PLAN 


The  instructions  on  the  cash  letter  accompany- 
ing the  item  should  include  the  following:* 

Protest    all    items    over    $20    not  Instnic- 

bearing  this  stamp  or  similar  stamp  tions  for 

containing  the  transit  number  of  a  Cash 

preceding  bank  endorser.  Letters 

The  teller  will  place  an  imprint  of  his  stamp  * 


N.  P. 
83-164 


on  every  item  of  over  $20.00  that  passes  through 
his  department  and  which  is  to  be  handled  as 
"no-protest." 

When  This  Plan  Is  in  Complete  Opera-  jngtjuc- 
TiON  THE  Clerks  Who  Handle  the  Incoming  tions  Au- 
AND  Outgoing  Mail  in   Subsequent  Banks  tomatically 
Will   Be   Relieved   from    Examining   Care-  Conveyed 
fully  Such  Items,  and  Comparing  the  Items 
With  the  Letters  in  Order  to  Determine 
What  Items  Are  To  Be  Treated  as  "No-pro- 
test."    If  the  cash  letters  read  as  above  indi- 
cated the  instructions  will  be  automatically  con- 
veyed through  all  hands  to  the  paying  banks. 

Tags  bearing  "no-protest"  instructions  pinned 

*  The  number  assigned  to  your  bank  under  the  Uni- 
versal Numerical  System  should  appear  on  the  stamp 
which  you  use. 

49 


THE  CLEARING  HOUSE 


Plan  Uni- 
versal in 
Scope 


or  pasted  to  checks,  as  well  as  the  numerous 
symbols  now  in  use,  together  with  all  of  their 
attending  annoyances,  will  disappear. 

Some  banks  may  for  their  own  convenience 
want  to  continue  the  practice  of  making  a  spe- 
cial record  on  their  outgoing  cash  letters  as  to 
what  items  are  to  be  handled  as  "no-protest.'' 
This  may  be  done  by  placing  the  letters  "N.  P." 
or  such  other  notations  as  are  satisfactory  either 
to  the  right  or  left  of  the  amounts  of  the  items 
to  which  they  apply. 

It  Is  Desirable  to  Make  the  Plan  Univer- 
sal IN  its  Scope.  It  is  simple  and  easy  of  appli- 
cation. Its  installation  causes  little  or  no  ex- 
pense. It  is  a  great  labor  and  time  saver  and  is 
beneficial  both  to  the  large  and  small  institu- 
tions. 

Where  banks  have  a  large  supply  of  cash  letters 
on  hand,  it  will  be  necessary  for  them  to  procure 
a  rubber  stamp  with  which  to  change  the  instruc- 
tions on  these  letters.  A  stamp  of  the  following 
form  is  recommended  for  this  purpose:* 

Protest  all  items  over  $20  not 
bearing  this  stamp  or  similar  stamp 
containing  the  transit  number  of  a 
preceding  bank  endorser, 

*  The  number  assigned  to  your  bank  under  the  Uni- 
versal Numerical  System  should  appear  on  the  stamp 
which  you  use. 

SO 


NO-PROTEST  SYMBOL  PLAN 

This  stamp  can  be  procured  from  the  Clearing 
House  Section  of  the  American  Bankers  Asso- 
ciation at  the  actual  cost  of  twenty-five  cents. 
The  other  stamp  will  also  be  furnished  at  actual 
cost,  fifteen  cents,  by  the  Clearing  House  Sec- 
tion, or  it  may  be  more  convenient  to  procure 
these  stamps  from  local  dealers. 

A  little  co-operation  means  success.    The  plan   pian 
is  copyrighted  and  banks  using  it  must  use  it  in    Copy- 
its  entirety,  observing  uniformity  in  the  follow-   "S"*®** 
ing  particulars : 

1st.     As  to  the  style  and  size  of  the  stamp. 

2nd.  As  to  place  of  affixing  stamp  to  checks 
and  drafts.  ( Should  be  affixed  as  near  as  is  pos- 
sible to  the  right-hand  end  of  the  face  of  the 
items.) 

3rd.     As  to  uniform  instructions  on  remittance   Uniform- 
letters,  and  ity  Es- 

4th.     As  to  minimum  amount  (we  have  adopt-  ^*^*^^^ 
ed  $20.00  as  the  minimum). 

If  banks  that  have  not  adopted  this  plan  will 
communicate  with  the  Secretary  of  the  Clearing 
House  Section,  he  will  furnish  such  additional 
information  as  may  be  desired. 


51 


TOTAL  BANK  TRANSACTIONS 


Advertising 
Feature 


Duplica- 
tion in 
Clearings 


BY  constantly  producing  and  publishing  sta- 
tistics which  are  universally  regarded  as  the 
best  barometer  of  growth  and  business  activity, 
Clearing  Houses  have  developed  into  highly  val- 
uable advertising  agencies  for  the  cities  wherein 
they  are  located. 

The  figures  which  have  been  used  most  widely 
for  this  purpose  are  the  bank  clearings.  They 
represent  the  total  volume  of  items  (checks  and 
drafts)  drawn  on  clearing  banks  which  pass 
through  the  Clearing  House ;  or,  in  other  words, 
are  the  sum  total  of  all  items  that  come  into 
the  possession  of  banks  having  the  privileges  of 
a  Clearing  House,  through  membership  therein 
or  by  agency,  and  which  are  drawn  on  or  pay- 
able at  the  offices  of  other  banks  that  in  turn 
have  the  privileges  of  a  Clearing  House.  These 
figures,  in  some  instances,  include  duplications  in 
the  form  of  cashier's  checks,  issued  in  lieu  of 
items  cleared  and  returned  direct  to  members  be- 
cause of  payment  thereon  being  refused ;  also  in- 
clude checks  drawn  against  members  by  the 
Clearing  House  managers  in  settlement  of  bal- 
sa 


THE  CLEARING  HOUSE 

ances  and  which  are  not  collected,  but  are  car- 
ried over  and  recleared  on  the  day  following. 
There  is  no  way  of  determining  what  is  the  total 
of  such  items,  but  were  the  total  of  these  items 
known  and  the  amount  excluded  from  the  clear- 
ings, the  figures  would  not  then  represent  the 
actual  business  transacted  because  a  great  pro- 
portion of  checks  and  drafts  are  deposited  with, 
or  cashed  at,  the  banks  on  which  they  are  drawn. 
These  do  not  pass  through  the  Clearing  House. 

It  is  estimated  that  about  four  or  five  per 
cent,  of  the  business  transacted  in  the  United 
States  is  transacted  through  the  means  of  actual 
cash  or  money.  Checks  and  drafts  are  used  in 
handling  the  other  ninety-five  or  ninety-six  per 
cent. 

In  order  that  there  may  be  available  in  addi- 
tion to  the  present  valuable  Clearing  House  statis- 
tics, figures  which  will  show  as  nearly  as  is  pos- 
sible the  actual  business  that  is  transacted 
throughout  the  country,  a  plan  of  producing  sta- 
tistics known  as  "Total  Bank  Transactions"  has  What  To- 
been  instituted  by  the  Clearing  House  Section 
of  the  American  Bankers  Association.  Under 
this  plan  it  is  hoped  that  the  principal  Clearing 
Houses  throughout  the  United  States  will,  in  ad- 
dition to  reporting  their  clearings,  make  a  re- 
port on  each  Thursday  of  the  total  volume  of 
business  transacted  by  the  members  and  non- 
53 


tal  Bank 
Transac- 
tions Rep- 
resent 


THE  CLEARING  HOUSE 

member  clearing  banks  through  the  mail,  over 
the  counter,  and  through  the  Clearing  House  for 
the  week  including  the  business  of  Thursday; 
that  is,  the  grand  total  of  all  debits  against  the 
accounts  covering  individual,  bank,  general  and 
savings  deposits,  also  certificates  of  deposits  and 
cashier's  checks  paid.  The  reporting  of  bank 
clearings  has  become  almost  automatic.  The 
"Total  Bank  Transaction"  figures  can  be  assem- 
bled with  but  very  little  trouble.  By  furnishing 
them  the  Clearing  Houses  will  be  rendering  a 
valuable  public  service  and  the  information  will 
prove  of  interest  and  value  to  every  bank  officer. 
Method  of  If  the  Clearing  Houses  will  supply  their  mem- 
Assembling  bers,  and  non-member  banks  with  forms  of  the 
*^®_-^*^"  accompanying  design  and  have  each  bank  charge 
some  employee  with  the  responsibility  of  posting 
thereon  the  information  at  the  close  of  business 
each  day,  it  will  become  an  easy  routine  to  handle. 
One  hundred  and  twenty  Clearing  Houses  are 
reporting  bank  clearings,  while  but  thirty-one  are 
reporting  total  bank  transactions.  The  latter 
number  should  be  increased  within  the  year  to 
include  at  least  one  hundred  of  the  leading  cities. 
Experience  shows  that  the  clearings  represent 
less  than  fifty  per  cent,  of  the  business  trans- 
acted and  that  if  one  hundred  leading  cities  would 
report  weekly  the  total  bank  transactions  an  ac- 

54 


ures 


■g 

1 

1 

1 

« 

M 

i 

6 

■33 

n 

S  a. 

So 

Vi 

V!) 

«> 
M 

Grand  Total.      .      .     $_ 
^e  statement  is  correct. 

§J3 

1 

1 

3oks  for  Week, 
ks  for  Week. 
It  Paid  for  Week 
d  for  Week.       . 

The  abo\ 

11 

s  on  Individual  B( 
s  on  Country  Boo 
rtificates  of  Depos 
shier 's  Checks  Pai 

Ending  Thursday 

i 

s 
u 

> 

1 

1 

1 

i 

Total  Debit 
Total  Debit 
Total  of  Ce 

i 

) 
5 
I 

5 

Si 

55 


TOTAL  BANK  TRANSACTIONS 

curate  idea  of  the  growth  and  business  activity 
of  the  country  could  be  formed  therefrom. 

Comparison  of  the  Clearings  and  Bank  Transac- 
tions OF  THE  Cities  Reporting  Both 

Bank 
Clearings  for  the    Transactions 
6  mo.  Including  6  mo.  Including 
June,  1916.        June,  1916. 

Atlanta $414,708,108  $558,532,000 

Cedar   Rapids    47,192,454  223,425,000 

Cincinnati    842,390,750  2,391,433,000 

Des  Moines 167,688,000  613,404,000 

Detroit  992,936,453  2,423,210,000 

Fort  Wayne 36,304,718  175,899,000 

Hartford  204,494,508  308,122,000 

Houston   245,880,995  246,745,000 

Indianapolis    264,375,501  81 1,438,000 

Kansas  City  2,103,968,578  3,721,752,000 

Los  Angeles  610,353,229  1,109,861,000 

Memphis    192,065,000  804,045,000 

Minneapolis    641,746,664  2,224,437,000 

New  Orleans  592,218,733  1,194,362,000 

Oakland 104,805,000  267,687,000 

Omaha  565,545,030  1,529,992,000 

Portland,  Me 60,138,201  172,542,000 

Providence   248,509,600  504,930,000 

Richmond   409,860,533  1,429,209,000 

Sacramento,  Cal 54,3 1 7,083  273,562,000 

San  Francisco  1,543,226,460  3,397,110,000 

St.  Joseph 242,053,000  1,267,451,000 

Scranton   80,334,392  205,443,000 

Seattle 350,348,000  846,426,000 

56 


THE  CLEARING  HOUSE 

South  Bend  $21,927,455  $48,914,000 

Spokane 1 10,920,000  277,476,000 

Springfield,  Mass 108,291,000  101,083,000 

Stockton   30,942,937  58,789,000 

Tacoma 54,208,747  147,814,000 

Toledo  222,534,594  970,479,000 

Trenton  57,760,409  165,565,000 


$11,623,046,132  $28,471,137,000 


57 


THE  FEDERAL  RESERVE  CLEARING 

SYSTEM 

SECTIONS  13  and  16  of  the  Federal  Re- 
serve Act  provide  that  Federal  reserve 
banks  shall  receive  on  deposit  from  their  re- 
spective members  and  from  other  Federal  re- 
serve banks  checks  and  drafts  drawn  upon  any 
member  of  a  Federal  reserve  bank  or  upon  any 
Federal  reserve  bank ;  and,  further,  that  the  Fed- 
eral Reserve  Board  may  require  the  Federal  re- 
serve banks  to  perform  the  functions  of  a  Clear- 
ing House. 

The  Federal  Reserve  Board  under  authority 
conferred  by  these  two  sections  has  established 
a  plan  of  clearing  and  settlement  of  balances 
through  a  central  fund  in  the  hands  of  the  Fed- 
eral Reserve  Board  at  Washington,  D.  C,  known 
Gold  Set-  as  the  "Gold  Settlement  Fund."  When  this 
plan  was  established,  every  Federal  reserve  bank 
was  required  to  deposit  with  the  Federal  Reserve 
Board  gold,  or  United  States  gold  certificates 
of  one  million  dollars  in  excess  of  the  net  bal- 
ances then  due  from  it  to  other  Federal  reserve 
banks  and  each  Federal  reserve  bank  is  required 


tlement 
Fund 


THE  CLEARING  HOUSE 

to  maintain  a  minimum  balance  of  one  million 
dollars  in  this  fund. 

Each  Federal  reserve  bank  carries  on  its  books,   Accounts 
in  its  relations  with  each  of  the  Federal  reserve   Carried 
banks,  two  accounts,  *'Due  To"  and  ''Due  From," 
also  an  account  known  as  the  ''Gold  Settlement 
Fund  Account,"   and   at   the   close   of  business 
each  Wednesday  wires  to  the  Federal  Reserve 
Board  advice  as  to  the  amount  then  *'Due  To" 
each     of    the    other    Federal     reserve    banks. 
The  Board  tabulates  the  balances   so   reported 
and  effects  a  clearing,  using  the  telegraphic  ad-   Clearing 
vices  as  a  basis  and  upon  the  same  principle  as     ^      ^^^ 
that  followed  by  regular  clearing  houses  in  mak- 
ing their  daily  exchanges.    The  net  balances  aris-   Balances 
ing  from  such  clearings  are  settled  by  book  en-  and  Set- 
tries  in  the  gold  settlement  fund  account.    Theo-  tlements 
retically  transfers  are  made  of  certificates  repre- 
senting the  amounts  of  the  balances  involved. 
After  each  clearing  the  Federal  Reserve  Board 
advises  each  Federal  reserve  bank  by  wire  as  to 
the  results.     These  telegraphic  advices  serve  as 
authority  for  making  entries  against  the  accounts. 
All  telegrams  are  sent  in  private  code  and  are 
confirmed  by  official  advices  through  the  mails. 
The  plan  relieves  the  necessity  of  transferring 
immense  sums  of  gold  and  other  lawful  money. 
The  balances  resulting  from  the  clearings  aver- 
age  less   than   seven  per  cent,   of   the   amount 
59 


FEDERAL  RESERVE  SYSTEM 

cleared.     The  plan  is  operated  in  the  interests 
of  economy,  safety  and  better  service.     It  is  a 
big  step  forward  and  is  the  forerunner  of  a  great 
universal  clearing  system. 
Diversity  Prior  to   July    15,  1916,   the   Federal   reserve 

of  Methods   banks  operated  clearing  or  collection  departments 

^^^'  through  which  checks  and  drafts  on  certain  mem- 

mented  ,  '^   ,  ,      x-    1       ,  ,       , 

With  ^^^^  ^"^  ^^  ^"^  Jrederal  reserve  banks  were  han- 

dled. These  departments  were  operated  under 
rules  which  varied  widely.  In  one  district  items 
not  bearing  the  endorsement  of  any  bank  located 
outside  of  that  district  were  taken  for  immedi- 
ate credit,  at  par,  when  drawn  upon  a  member 
bank  or  a  Federal  reserve  bank;  in  other  dis- 
tricts items  were  taken  when  drawn  upon  mem- 
ber banks  that  had,  through  vote  of  their  respec- 
tive boards  of  directors,  agreed  to  maintain  with 
their  Federal  reserve  bank  balances  in  excess  of 
their  required  reserves  in  sufficient  amount  to 
cover  such  items,  and  further  to  permit  their 
Federal  reserve  bank  to  debit  such  member  banks' 
accounts  with  the  amount  of  the  items  on  the 
day  they  are  received  by  Federal  reserve  bank. 
Two  of  the  Federal  reserve  banks  took  the  po- 
sition that  the  law  did  not  contemplate  that  they 
should  actually  clear  or  collect  a  large  volume  of 
items,  but  that  they  should  serve  only  as  regu- 
lators of  exchange. 

Aside    from    the    knowledge    and    experience 
60 


THE  CLEARING  HOUSE 

gained,  little  was  accomplished  through  these 
operations  up  to  July  15,  1916.  >  On  that  day, 
under  orders  from  the  Federal  Reserve  Board,  a 
practically  uniform  plan  of  clearing  and  collection  Uniform 
was  established  in  all  the  Federal  reserve  banks.  -^^^^ 
Under  this  plan  each  Federal  reserve  bank  op- 
erates a  clearing  or  collection  department.     In  Provisions 

the  announcement  of  the  plan  the  provisions  cov-  °^  *^* 

J  Plan 

ered  were: 

First:  That  each  Federal  reserve  bank  shall  It«"^s 
receive  for  collection  and  credit,  from  member 
banks  and  from  other  Federal  reserve  banks  at 
par,  so  far  as  concerns  exchange  charges,  checks 
and  drafts  drawn  upon  members  of  the  Federal 
reserve  system. 

Second:  That  each  Federal  reserve  bank  shall 
receive,  from  its  members  and  from  other  Fed- 
eral reserve  banks,  for  collection  and  credit,  at 
par,  so  far  as  concerns  exchange  charges,  checks 
and  drafts  drawn  on  any  bank,  banker  or  trust 
company  when  such  checks  and  drafts  can  be 
collected  by  the  Federal  reserve  banks  through 
member  banks  or  otherwise  at  par. 

Third:  That  each  Federal  reserve  bank  will 
receive  for  collection  and  credit  at  par  so  far  as 
concerns  exchange  charges,  checks  and  drafts 
drawn  upon  any  Federal  reserve  bank. 

Fourth:     Par  lists  covering  non-member  banks 
whose  items  can  be  handled  at  par,  so  far  as  con- 
61 


FEDERAL  RESERVE  SYSTEM 


Tentative 
Credit 


Non-Mem- 
ber Bank 
Checks 


Expense  of 

Shipping 

Funds 


cerns  exchange  charges,  through  the  Federal  re- 
serve banks  will  be  furnished  by  the  Federal  re- 
serve banks  to  their  respective  members. 

Fifth:  Tentative  credit  for  items  referred  to 
in  provisions  Nos.  i,  2,  3  and  4  will  be  given  by 
Federal  reserve  banks  to  their  respective  mem- 
bers, but  the  proceeds  will  not  be  available  for 
use  either  as  reserve  or  otherwise  until  the  funds 
are  actually  collected.  (Two  Federal  reserve 
banks  have  announced  that  balances  represented 
by  such  tentative  credit  entries  may  be  treated 
as  optional  reserves.) 

Sixth:  The  Federal  reserve  banks  will  for- 
ward items  direct  to  the  member  banks  upon 
which  drawn,  and  will  charge  them  to  the  mem- 
ber banks'  accounts  when  advice  of  payment 
has  been  received,  or  when  sufficient  time  has 
elapsed  within  which  to  receive  advice  of  pay- 
ment. 

Seventh:  Member  banks  will  be  given  oppor- 
tunity to  handle  checks  on  non-member  banks  be- 
fore effort  is  made  by  a  Federal  reserve  bank 
to  secure  direct  par  connections  with  non-mem- 
ber banks. 

Eighth:  Where  member  banks  do  not  have 
sufficient  volume  of  items  to  offset  at  the  Federal 
reserve  bank  items  sent  to  said  members  by  the 
Federal  reserve  bank,  such  members  may  ship 
lawful  money  or  Federal  reserve  notes  in  pay- 
62 


THE  CLEARING  HOUSE 

ment  at  the  expense  of  their  Federal  reserve 
bank. 

Ninth:  In  handling  items  for  member  banks,  Liability 
the  Federal  reserve  bank  will  act  as  agent  only. 
It  will  require  each  member  to  authorize  it  to 
send  checks  and  drafts  for  collection  to  banks 
on  which  they  are  drawn,  and  will  assume  no 
liability  except  for  negligence. 

Tenth:  The  cost  of  clearing  and  collecting 
checks  and  drafts  will  be  assessed  against  the  Service 
banks  depositing  such  items  with  the  Federal  re-  Charge 
serve  bank.  This  charge  will  be  known  as  a  ser- 
vice charge,  and  will  be  fixed  at  so  much  per 
item.  (It  is  generally  estimated  by  the  Federal 
reserve  banks  that  the  cost  will  range  from  one 
and  one-half  to  one  and  three-fourths  cents  per 
item.) 

Eleventh:     The  Federal  Reserve  Board  will  fix   Penalty 
a  penalty,  as  provided  in  Sec.  19  of  the  Federal       .     ,  " 
Reserve  Act,  to  be  imposed  upon  member  banks  Reserves 
for  encroaching  upon  their  reserves. 

Twelfth:  Each  Federal  reserve  bank  will 
carefully  analyze  the  accounts  of  the  member 
banks,  and  will  apply  a  penalty  where  reserves 
are  impaired.  A  schedule  of  time  required 
within  which  to  collect  checks  and  drafts  will  be 
furnished  to  each  member  bank  in  order  to  en- 
able it  to  determine  the  time  at  which  any  item 
63 


FEDERAL  RESERVE  SYSTEM 

sent  to  the  Federal  reserve  bank  may  be  counted 
as  reserve  and  will  be  available  to  meet  checks 
drawn  against  the  funds  represented  thereby. 

If  operated  as  it  should  be,  that  is,  along  the 
lines  of  economy  and  efficiency,  this  new  plan 
will  afford  a  means  of  greatly  reducing  the  la- 
bor, expense  and  time  involved  in  liquidating 
cash  items. 

It  has  in  it  the  possibilities  of  the  greatest  col- 
lection system  the  world  has  ever  known,  but 
the  departments  operated  under  the  plan  should 
be  self-sustaining,  and  sections  13  and  16  of  the 
Federal  Reserve  Act  should  be  so  amended  and 
Burden  of  the  plan  so  revised  that  the  burden  of  the  ex- 
Expense  pense  will  fall  upon  the  beneficiaries,  namely,  the 
parties  whose  debts  are  liquidated  by  the  use  of 
the  checks  and  drafts  that  pass  through  the  Fed- 
eral reserve  banks.  It  would  then  be  as  the 
framers  of  the  law  intended.  During  the  initial 
stages  and  so  long  as  the  majority  of  the  banks 
are  not  members  of  the  Federal  reserve  system 
keen  competition  will  prevent  lodging  the  expense 
upon  the  parties  who  draw  the  checks  and  drafts, 
and  it  will  be  borne  largely  by  the  so-called  coun- 
try banks.  Between  twenty-five  and  thirty  bil- 
lion dollars'  worth  of  country  checks  and  drafts 
are  collected  annually  by  the  banks  at  a  cost  of 
many  millions  of  dollars.  The  general  business 
64 


THE  CLEARING  HOUSE 

public  should  benefit  by  any  reduction  that  is 
made  in  that  cost  through  the  operation  of  the 
new  clearing  and  collection  system,  but  should 
not  benefit  beyond  the  reduction. 


65 


THE  CLEARING  HOUSE  SECTION 


and 
Purposes 


T 


HE  Clearing  House  Section  is  a  subdi- 
vision of  the  American  Bankers  Associa- 
tion organized  for  the  purpose  of  providing 
a  channel  through  which  questions  of  im- 
portance and  of  common  interest  to  the  Clearing 
Houses  and  to  the  banks  generally  may  be  dis- 
cussed and  solved.  It  affords  a  means  through 
which  information  and  data  may  be  gathered  and 
disseminated  in  the  interests  of  better  systems, 
methods  and  practices.  It  is  the  outgrowth  of 
Origin  the  Conference  of  Clearing  Houses  of  the  United 

States  which  in  turn  owed  its  birth  to  resolu- 
tions adopted  by  the  Michigan  Bankers  Associa- 
tion in  convention  at  Port  Huron  July  14th,  1899. 
This  conference  met  annually  and  was  quite  ac- 
tive up  to  1905,  at  which  time  its  work  was  taken 
over  by  a  committee  representing  the  American 
Bankers  Association.  The  constitution  and  by- 
laws of  the  American  Bankers  Association  were 
then  amended  and  under  the  provisions  of  the 
amendment  the  Clearing  House  Section  was  cre- 
ated and  assumed  charge  of  the  work  of  this  spe- 
cial committee. 

66 


THE  CLEARING  HOUSE 

All  regularly  organized  Clearing  House  Asso- 
ciations are  eligible  for  membership  in  the  Sec-  Member- 
tion.     There  are  233  such  organizations  in  the  *^^P 
United  States  and  of  these   191   are  members. 
Membership  is  free  and  the  expenses  of  the  Sec-  Expenses 
tion  are  defrayed  by  appropriations  made  semi- 
annually by  the  American  Bankers  Association. 

Through  the  influence  of  the  Section  dozens  of 
new  Clearing  House  Associations  have  been  or- 
ganized and  the  functions  of  the  existing  Clear- 
ing Houses  have  been  broadened  and  greatly  ex- 
tended. It  has  fathered,  evolved  and  developed 
many  schemes  and  plans  through  the  operation  Work 
of  which  the  banks  of  the  country  have  saved  Done 
many  hundreds  of  thousands  of  dollars.  These 
features  include  the  Universal  Numerical  Sys- 
tem, the  Country  Clearing  House,  Clearing  House 
Examinations,  uniform  counter  checks,  the  no- 
protest  symbol  plan  and  the  plan  of  the  gold  set- 
tlement fund  now  used  by  the  Federal  reserve 
system. 

The  administration  of  the  affairs  of  the  Sec- 
tion is  vested  in  the  Executive  Committee  con- 
sisting of  six  members  and  three  ex-officio  mem- 
bers, namely,  the  President,  Vice-President  and  Executive 
the  ex-President,  for  a  period  of  one  year.    Two  Committee 
of  the  six  regular  members  are  elected  for  terms  ^ 
of  three  years  by  vote  of  the  official  delegates 
present  at  the  annual  meeting  of  the   Section 


THE  CLEARING  HOUSE  SECTION 


Represen- 
tation on 
Council 


which  is  held  during  the  convention  of  the  Ameri- 
can Bankers  Association.  Temporary  vacancies 
may  be  filled  by  the  Committee. 

The  Section  is  represented  in  the  council  meet- 
ings of  the  American  Bankers  Association  by  its 
President,  who  is  a  member  thereof  ex-officio. 

The  Executive  Committee  selects  its  own  chair- 
man and  is  authorized  to  employ  a  secretary  of 
the  Section  who  may  or  may  not  be  a  member  of 
the  committee  and  to  use  the  funds  appropriated 
in  the  interests  of  the  Section,  and  is  empowered 
to  transact  such  business  as  may  be  authorized 
by  the  Section  or  as  may  be  required  in  the  fur- 
therance of  the  interests  of  Clearing  Houses. 


6g 


OFFICERS    AND    COMMITTEES,    WITH 
TERMS  OF  OFFICE 

Presidents 

Walker  Hill,  St.  Louis,  Mo 1906-1908 

August  Blum,  Chicago,  111 May  to  September,  1908 

E.  C  McDougal,  Buffalo,  N.  Y 1908-1909 

Sol  Wexler,  New  Orleans,  La 1909-1910 

E.  R.  Fancher,  Cleveland,  0 1910-1911 

Charles  A.  Ruggles,  Boston,  Mass 1911-1912 

Ralph  Van  Vechten,  Chicago,  111 1912-1913 

John  K.  Ottley,  Atlanta,  Ga 1913-1914 

A.  O.  Wilson,  St.  Louis,  Mo 1914-1915 

J.  D.  Ayres,  Pittsburgh,  Pa 1915-1916 

Vice-  Presidents 

Fred.  E.  Farnsworth,  Detroit,  Mich 1906-1908 

E.  C.  McDougal,  Buffalo,  N.  Y May  to  Sept.,  1908 

Sol  Wexler,  New  Orleans,  La 1908-1909 

E.  R.  Fancher,  Cleveland,  0 1909-1910 

George  Guckenberger,  Cincinnati,  O...1910 — June,  191 1 
Charles  A.  Ruggles,  Boston,  Mass..  191 1 — to  Nov.,  191 1 

Ralph  Van  Vechten,  Chicago,  111 1911-1912 

John  K.  Ottley,  Atlanta,  Ga 1912-1913 

A.  O.  Wilson,  St.  Louis,  Mo 1913-1914 

J.  D.  Ayres,  Pittsburgh,  Pa 1914-1915 

W.  D.  Vincent,  Spokane,  Wash 1915-1916 

69 


OFFICERS  AND  COMMITTEES 

Chairmen 

F.  W.  Hayes,  Detroit,  Mich 1899-1903 

W.  T.  Fenton,  Chicago,  111 1903-1905 

Walker  Hill,  St.  Louis,  Mo 1905-1906 

August  Blum,  Chicago,  111 1906-1908 

Sol  Wexler,  New  Orleans,  La May  to  Sept.,  1908 

E.  R.  Fancher,  Cleveland,  0 1908-1909 

George  Guckenberger,  Cincinnati,  O 1909-1910 

Ralph  Van  Vechten,  Chicago,  111 1910-1911 

John  K.  Ottley,  Atlanta,  Ga 1911-1912 

A.  O.  Wilson,  St.  Louis,  Mo ^ 1912-1913 

J.  D.  Ayres,  Pittsburgh,  Pa 1913-1914 

W.  D.  Vincent,  Spokane,  Wash 1914-1915 

John  McHugh,  New  York,  N.  Y 1915-1916 

Secretaries 

Fred.  E.  Farnsworth,  Detroit,  Mich 1899-1911 

O.  Howard  Wolfe,  New  York,  N.  Y June,  1911-1915 

Jerome  Thralls,  New  York,  N.  Y February,  1916 

Members  of  Executive  Committee 
(Alphabetical  Order) 

Ayres,  J.  D.,  Pittsburgh,  Pa 1911-1914 

Beymer,  A.  S.,  Pittsburgh,  Pa 1907-1908 

Blum,  August,  Chicago,  111 1905-1909 

Chamberlain,  F.  A.,  Minneapolis,  Minn 1907-1909 

Clarke,  Lewis  L.,  New  York,  N.  Y 1912-1915 

Cox,  L.   O.,  Louisville,   Ky 1899-1903 

Crane,  A.  A.,  Minneapolis,  Minn 1915-1918 

Devries,  Christian,  Baltimore,  Md 1899 

Donald,  James  M.,  New  York,  N.  Y 1909-1912 

Fancher,  E.  R.,  Cleveland,  0 1905-1909 

Fenton,  W.  T.,  Chicago,  Illinois 1905-1906 

70 


THE  CLEARING  HOUSE 

Fulton,  J.  H.,  New  Orleans,  La 1914-1917 

Griffith,  G.   P.,   Cincinnati,  O.     To  fill  unexpired 

term  of  Mr.  Guckenberger June  to  Nov.,  191 1 

Guckenberger,  George,  Cinn.,  O. .  .1900-1905 — 1907-1910 

Hulbert,  E.  D.,  Chicago,  111 1901-1903 

Hutcheson,  C  G.,  Kansas  City 1907-1910—1914-1917 

Jess,  Stoddard,  Los  Angeles,  Cal 1913-1916 

Keser,  H.  J.,  Philadelphia,  Pa 1906- 1908 

Lombard,  I.  G.,  Chicago,  111 1899-1903 

McAdams,  Thos.  B.,  Richmond,  Va 1915-1918 

McHugh,   John,    Sioux   City,   Iowa — One  year   of 

unexpired  term  of  Mr.  Power  (Deceased)  1912-1916 

Mcintosh,  C  K.,  San  Francisco,  Cal 1909- 1912 

Moore,  Charles  H.,  Kansas  City,  Mo 1906-1907 

Ottley,  John  K.  Atlanta,  Ga 1910-1913 

Power,  Geo.  C,  St.  Paul,  Minn.  (Deceased)   1910-1912 

Ruggles,  Chas.  A.,  Boston,  Mass 1908- 191 1 

Russel,  Geo.  S.,  Cleveland,  0 1899-1903 

Thorne,  Gilbert  G.,  Minneapolis,  Minn 1899-1900 

Van  Vechten,  Ralph,  Chicago,  111 1908-1911 

Vincent,   W.  D.,   Spokane,   Wash 1912-1915 

Wexler,  Sol.,  New  Orleans,  La 1906-1908 

Wilson,  A.  O.,  St.  Louis,  Mo 1911-1914 

Members  of  Executive  Committee 
{Date  Order) 

Isaac  G.  Lombard,  Chicago,  111 1899-1903 

George  S.  Russell,  Cleveland,  0 1899-1903 

Christian  Devries,  Baltimore,  Md 1899 

L.  O.  Cox,  Louisville,  Ky 1899-1903 

Gilbert  G.  Thorne,  Minneapolis,  Minn 1899-1900 

George  Guckenberger,  Cinn.,  O.  ....1900- 1905 — 197-1910 

E.  D.  Hulbert,  Chicago,  111 1901-1903 

W.  T.  Fenton,  Chicago,  111 1905-1906 

71 


THE  CLEARING  HOUSE 

August  Blum,  Chicago,  III 1905-1909 

E.  R.  Fancher,  Cleveland,  0 1905-1909 

H.  J.  Keser,  Philadelphia,  Pa 1906-1908 

Charles  H.  Moore,  Kansas  City,  Mo 1906-1907 

Sol  Wexler,  New  Orleans,  La 1906-1908 

A.  S.  Beymer,  Pittsburgh,  Pa 1907-1908 

F.  A.   Chamberlain,  Minneapolis,  Minn 1907-1909 

C.  G.  Hutcheson,  Kansas  City,  M0.1907-1910 — 1914-1917 

Charles  A.  Ruggles,  Boston,  Mass 1908-1911 

Ralph  Van  Vechten,  Chicago,  111 1908-191 1 

James  M,  Donald,  New  York,  N.  Y 1909-1912 

C.  K.  Mcintosh,  San  Francisco,  Cal 1909- 1912 

George  C.  Power,  St.  Paul,  Minn  (Deceased)  1910-1912 

John  K.  Ottley,  Atlanta,  Ga 1910-1913 

J.  D.  Ayres,  Pittsburgh,  Pa 1911-1914 

A.  O.  Wilson,  St  Louis,  Mo 1911-1914 

G.  P.  Griffith,  Cincinnati,  O. — Unexpired  term  of 

Mr.  Power June  to  Nov.,  1911 

Lewis  L.  Clarke,  New  York,  N.  Y 1912-1915 

W.  D.  Vincent,  Spokane,  Wash 1912-1915 

John  McHugh,  Sioux  City,  Iowa.     (One  year  of 

unexpired  term  of  Mr.  Power) 1912-1916 

Stoddard  Jess,  Los  Angeles,  Cal 1913-1916 

J.  H.  Fulton,  New  Orleans,  La 1914-1917 

A.  A.  Crane,  Minneapolis,  Minn 1915-1918 

Thos.  B.  McAdams,  Richmond,  Va 1915-1918 

Committee  on  Rates^  Rules  and  Regulations 
1899 

F.  W.  Hayes,  Detroit,  Mich.,  Chairman. 
George  S.  Russel,  Cleveland,  O. 
Christian  Devries,  Baltimore,  Md. 
L.  O.  Cox,  Louisville,  Ky. 
Gilbert  G.  Thorne,  Minneapolis,  Minn. 
Isaac  G.  Lombard,  Chicago,  111.,  ex-oMcio. 
72 


OFFICERS  AND  COMMITTEES 

Committee   Succeeding  to  Work  of   Conference  of 

Clearing  Houses 

1905 

Walker  Hill,  St.  Louis,  Mo. 
W.  T.  Fenton,  Chicago,  111. 
August  Blum,  Chicago,  111. 
George  Guckenberger,  Cincinnati,  O. 
E.  R.  Fancher,  Cleveland,  O. 
Fred.  E.  Farnsworth,  Detroit,  Mich. 

Numerical  System  Committbe 
1910-1913 

W.  G.  Schroeder,  Chicago,  111.,  Chairman. 
C  R.  McKay,  Chicago,  111. 
J.  A.  Walker,  Chicago,  111. 

Committee   on    Codifying    Collection    Laws 
1913 

R.  B.  Cox,  New  York,  N.  Y.,  Chairman. 
Thomas  B.  Paton,  New  York,  N.  Y. 
Newton  D.  Ailing,  New  York,  N.  Y. 
W.  M.  Van  Deusen,  Newark,  N.  J. 
The  Secretary  of  the  Section. 

Numerical  System  Committee 
1913-1915 

C.  R.  McKay,  Chicago,  111.,  Chairman. 
J.  A.  Walker,  Chicago,  111. 
W.  G.  Schroeder,  Chicago,  111. 
73 


OFFICERS  AND  COMMITTEES 

Numerical  System  Committee 
1915 

James  A.  Walker,  Chicago,  111.,  Chairman. 

C  E.  Estes,  Chicago,  III. 

R.  G.  Danielson,  Chicago,  111. 

Committee  on  Country  Clearing  Houses 
1915 

Richard  S.  Hawes,  St.  Louis,  Mo.,  Chairman. 
L.  F.  Kiesewetter,  Columbus,  O. 
Alexander  Dunbar,  Pittsburgh,   Pa. 
O.  Howard  Wolfe,  Philadelphia,  Pa. 
James  Ringold,  Denver,  Colo. 

No-protest  Symbol  Committee 
1915 

W.  D.  Vincent,  Spokane,  Wash. 


74 


CLEARING    HOUSES    OF    THE    UNITED 
STATES 

— Indicates  clearing  houses  that  conduct  country  col- 
lection departments. 

*  Indicates  clearing  houses  that  conduct  examination 
departments. 

Members    of    the    Clearing    House    Section 


Aberdeen,  So.  Dak. 

Adrian,  Mich.., 

Akron,  Ohig.'"' 
Albany,  N.  Y. 

Albany,  Ore. 

Altoona,  Pa. 

Amarillo,  Tex. 
-Atlanta,  Ga. 
-Augusta,  Ga. 

Aurora,  111. 

Austin,  Texas. 

Bakersfield,   Cal. 
Baltimore,  Md. 
Bangor,  Me. 
Bay  City,  Mich. 
Beaumont,  Texas. 
Beaver   County, 

(New  Brighton,  Pa.) 
Billings,   Mont. 


Birmingham,  Ala. 
Bloomington,  111. 
Boise,  Idaho. 
Boston,  Mass. 
Brunswick,  Ga. 
Buffalo,  N.  Y. 
Butler,  Pa. 

Canton,  O. 
Cedar  Rapids,  Iowa. 
Charleston,  So.  Car. 
—Chattanooga,  Tenn. 
Chester,  Pa. 

*  Chicago,  111. 
Chillicothe,   Mo. 
Cincinnati,   O. 

*  Cleveland,  O. 
Coeur  D'Alene,  Idaho. 
Colorado  Springs,  Colo. 
Columbia,  So.  Car. 


75 


THE  CLEARING  HOUSE 


Columbus,  Ga. 
*  Columbus,  O. 

Dallas,  Tex. 
Danville,  111. 
Davenport,  Iowa. 
Dayton,  O. 
Decatur,  111. 
Denver,  Colo. 
Des  Moines,  Iowa. 
—Detroit,  Mich. 
Duluth,  Minn. 

El  Paso,  Texas. 
Emporia,  Kan. 
Ennis,  Texas. 
Erie,  Pa. 
Evansville,  Ind. 
Fall  River,  Mass. 
Fargo,  N.  D. 
Flint,   Mich. 
Fort  Wayne,  Ind. 
Fort  Worth,  Texas. 
Frederick,  Md. 
Fremont,   Neb. 
Fresno,  Cal. 

Galveston,  Texas. 
Gary,  Ind. 

Grand  Forks,  N.  D. 
Grand  Rapids,  Mich. 
Greensburg,  Pa. 
Greenville,  S.  C. 
Grand  Junction,  Colo. 
Guthrie,  Okla. 


1^ 


Hagerstown,  Md. 
Hamilton,  O. 
Harrisburg,   Pa. 
Hartford,  Conn. 
Hastings,  Neb. 
Hawkinsville,   Ga, 
Helena,  Mont. 
Holyoke,  Mass. 
Houston,  Texas. 

Indianapolis,  Ind. 

Jackson,  Mich. 
Jacksonville,  Fla. 
Jacksonville,  111. 
Joplin,   Mo. 

*  Kansas  City,  Kansas. 
*-Kansas  City,  Missouri. 
Knoxville,  Tenn. 

Lancaster,  Pa. 

Lansing,  Mich. 

Lawrence,  Kan. 

Lawton,  Okla. 

Lewistown,   Mont. 

Lexington,  Ky. 

Lima,  O. 

Lincoln,  Nebr. 

Little  Rock,  Ark. 

Long  Beach,  Cal. 

Lorain,  O. 
*Los  Angeles,  Cal. 
♦-Louisville,  Ky. 

Lowell,  Mass. 


MEMBERS 


— Macon,  Ga. 
Mansfield,  O. 
McAlester,  Okla. 
Memphis,  Tenn. 
Meridian,  Miss. 

*  Milwaukee,  Wis. 

*  Minneapolis,  Minn. 
Mobile,  Ala. 
Montclair,  N.  J. 
Montgomery,  Ala. 

*  Muskogee,   Okla. 

*-Nashville,  Tenn. 
New  Albany,  Ind. 
New  Bedford,  Mass. 
New  Castle,  Pa. 
New  Haven,  Conn. 
Newnan,  Ga. 

*  New  Orleans,  La. 
Newport  News,  Va. 

*-New  York,  N.  Y. 
Norfolk,  Va. 
Norristown,  Pa. 
North  Yakima,  Wash. 

Oakland,  Cal. 

Ogden,  Utah. 
♦-Oklahoma  City,  Okla. 
— Omaha,   Nebr. 

Orange,  N.  J. 

Oshkosh,  Wis. 

Owensboro,  Ky. 

Pasadena,  Cal. 
Peoria,  111. 


*  Philadelphia,  Pa. 
Pine  Bluff,  Ark. 
Pittsburgh,  Pa. 
Portland,  Me. 

*  Portland,  Ore. 
Providence,  R.  I. 

Quincy,  111. 

Raleigh,  N.  C. 
Reading,  Pa. 
Reno,  Nev. 
Richmond,  Va. 
— Richmond  Country 
C.  H.,  Va. 
Rochester,  N.  Y. 
Rockford,  111. 

Sacramento,  Cal. 

*  St.  Joseph,  Mo. 
*-St.  Louis,  Mo. 
*St.  Paul,  Minn. 

Salt  Lake  City,  Utah. 
San  Antonio,  Texas. 
San  Diego,  Cal. 
San  Francisco,  Cal. 
San  Jose,  Cal. 
Santa  Rosa,  Cal, 
Savannah,  Ga. 
Scranton,  Pa. 
Seattle,  Wash. 
Sedalia,  Mo. 
Sioux  City,  Iowa. 
Sioux  Falls,  S.  D. 
South  Bend,  Ind. 


77 


THE  CLEARING  HOUSE 


Spartanburg,  S.  C. 
*  Spokane,  Wash. 
Springfield,  111. 
Springfield,  Mass. 
Springfield,  Mo. 
Springfield,  O. 
Stockton,  Cal. 
Superior,  Wis. 
Syracuse,  N.  Y. 

Tacoma,  Wash. 
Tampa,  Fla. 
Texarkana,  Ark. 
Toledo,  O. 
Topeka,  Kan. 
Trenton,  N.  J. 
Tulsa,  Okla. 


Vicksburg,  Miss. 

Washington,  D.  C. 
Waterbury,  Conn. 
Wheeling,  W.  Va. 
Wichita,  Kan. 
Wilkes-Barre,  Pa. 
Wilmington,  Del. 
Wilmington,  N.  C. 
Worcester,  Mass. 

York,  Pa. 
Youngstown,  O. 

Zanesville,  O. 


Non-Members 


Albany,  Ga. 
Ann  Arbor,  Mich. 
Asheville,   N.   C. 
Atchison,  Kan. 

Bartlesville,  Okla. 
Belton,  Tex. 
Binghamton,  N.  Y. 
Bowling  Green,  Ky. 

Charlotte,  N.  C. 
Cheraw,  S.  C. 
Connellsville,  Pa. 
Cordele,  Ga. 


?8 


Dubuque,  Iowa. 

Elberton,  Ga. 
Estherville,  la. 
Eugene,  Ore. 

Franklin,  Pa. 

Gainesville,  Fla. 

Hammond,  Ind. 
Helena,  Ark. 
Henderson,  Ky. 
Homestead,  Pa. 


MEMBERS 


Kalamazoo,  Mich. 


Lebanon,  Pa. 
Lynchburg,   Va. 


Palestine,  Tex. 
Passaic,  N.  J. 
Pittsburgh,  Kan. 

Ritzville,  Wash. 
Rome,  Ga. 


Medford,    Ore. 
Muncie,  Ind. 


Saginaw,  Mich. 
Santa  Monica,  Cal. 
Shreveport,  La. 


Nebraska  City,  Nebr. 


Valdosta,  Ga. 
Vidalia,  Ga. 


Ocala,  Fla. 
Oil  City,  Pa. 


Waco,  Tex. 
Washington,  Ga, 


79 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 


AN     INITIAL     FINE     OF     25     CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  50  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $1.00  ON  THE  SEVENTH  DAY 
OVERDUE. 


331933 


MAR  2  4 
NOV  22  1933 

>*"8     6  19J4 


^    ^^G  28  1940 

'       JAN  1 3  1998 


933 


LD  21-50rn-l,'33 


YB    iol^o 

U.  C.  BERKELEY  LIBRARIES 


CD57=llfill2 


357345 

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UNIVERSITY  OF  CALIFORNIA  LIBRA.  / 


